Opinion: SB 11 is a disaster for CT businesses — and a gift to big health insurance

Hartford Business Journal – Friday, March 28, 2025
By Michael Waterbury

We hear it all the time — health care needs to change.

Costs are out of control. Transparency is lacking. Employers and employees alike are drowning in expenses with no clear understanding of where their money is going.

While there’s ongoing conversation in Washington about fixing the system, some Connecticut lawmakers are proposing legislation that undermines employers who have taken real steps to regain control through self-funding.

Senate Bill 11 (SB 11), particularly Section 12, is a direct hit to businesses that have taken control of their health care, pushing them back into the clutches of big insurance companies.

It’s a gift-wrapped handout to the fully insured market, forcing Connecticut businesses to either pay exponentially more for health care, give up offering benefits altogether or retreat to the fully insured system — an option that isn’t even available to many small- to midsized self-insured employers, as large insurers often refuse to bid on their plans.

Those that do manage to secure coverage often face skyrocketing premiums, zero transparency and no control.

This isn’t just bad policy — it’s reckless.

Self-funding: the one avenue for real cost control

Businesses turned to self-funding because the traditional insurance system is broken. Self-funded employers aren’t just purchasers of health insurance — they’re running their own health plans.

They analyze costs, negotiate provider contracts and manage pharmacy benefits. They choose what’s best for their employees instead of letting big insurance companies dictate their every move.

Self-funding gives employers real data, real control and real options. Unlike the fully insured system — where companies are forced to “order off the menu” without even knowing the prices — self-funding empowers employers to build benefits based on what their specific employee population needs.

More importantly, employers have a fiduciary duty to act in the best interest of their employees, ensuring that every healthcare dollar is spent wisely.

Self-funding allows them to fulfill this obligation by making data-driven decisions, eliminating waste and strategically layering in programs and cost-control mechanisms that drive down expenses.

By tailoring benefits and implementing innovative solutions like direct contracting, transparent pharmacy pricing and proactive care management, self-funded employers can reduce out-of-pocket costs for their people while maintaining high-quality coverage.

The rise of captives and other alternative funding mechanisms proves that businesses want out of the traditional insurance model. The market is already moving in the right direction — until SB 11 threatens to pull it backward.

SB 11: A death sentence for self-funded plans

This bill doesn’t just nudge employers away from self-funding — it blows the whole system up.

It saddles self-funded employers with a massive new financial burden, imposing a blanket aggregate attachment point of $250,000 for all businesses offering self-funded health plans.

That means that every self-funded employer, regardless of size, would be forced to cover the first $250,000 in medical claims out-of-pocket before their stop-loss insurance started paying.

This change would hit small- to midsized businesses especially hard, increasing from the current $20,000 threshold for employers with fewer than 50 employees.

Currently, half of businesses in Connecticut offer self-funded, employer-sponsored health plans, covering medical claims out-of-pocket while using stop-loss policies as protection against catastrophic expenses.

If this bill passes, these businesses, the backbone of Connecticut’s economy, would be left with impossible choices: absorb crushing costs; cut jobs, wages or benefits to afford coverage; or surrender to the fully insured market — where big insurance can drive up costs unchecked, piling on hidden administrative fees and padding their profits with little to no accountability.

Self-funding eliminates these opaque charges, ensuring that every healthcare dollar goes toward actual care, not insurer windfalls.

And when costs rise for employers, they rise for employees too.

The impact on employee costs and employer fiduciary obligations

If lawmakers think this won’t directly hit workers, they’re wrong — higher costs mean higher deductibles, steeper out-of-pocket expenses and fewer covered services, leaving employees to bear the financial burden of a system that puts insurer profits over people.

This bill also has the potential to introduce higher pharmacy costs for employees.

SB 11, Section 24, imposes regulatory changes on pharmacy benefit managers (PBMs). It limits the operation of PBMs and redirects rebates, forcing health plans to absorb increased costs of prescription drugs, which would likely be passed on to employees.

While I agree that reform in the PBM space is necessary, shifting more financial burden onto employees through restrictive mandates is not the answer.

Employers are already being hit with lawsuits for not living up to their fiduciary obligations — like recent cases against Johnson & Johnson and JPMorgan Chase.

This bill would only make it worse, creating an environment where responsible pharmacy and healthcare management become nearly impossible. It’s reckless and unfair to force employers into a system that sets them up for failure.

Who really wins? Big insurance

It’s no secret who benefits from this bill — insurance giants.

They’ve been watching the rise of self-funding and captives, and they don’t like it. These companies thrive on opacity. They make their money by keeping employers in the dark, setting premiums without transparency, and controlling every aspect of a health plan.

By making self-funding unaffordable, SB 11 forces businesses back into a system where they have no control. And in the fully insured world, where does all that extra money go?

Straight into “administrative fees” and insurer profits.

This isn’t about helping employers or employees. It’s about consolidating power in the hands of a few massive insurance companies that already dominate the market.

If lawmakers truly want to reform health care, they should be encouraging self-funding, not killing it.

Michael Waterbury is a Connecticut business owner and CEO of Collinsville-based Goodroot, a community of healthcare companies.

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