HB 6871, An Act Limiting Out-Of-Network Health Care Costs

TESTIMONY OF CONNECTICUT HOSPITAL ASSOCIATION
SUBMITTED TO THE INSURANCE AND REAL ESTATE COMMITTEE

Tuesday, February 18, 2025

The Connecticut Hospital Association (CHA) appreciates this opportunity to submit testimony concerning HB 6871, An Act Limiting Out-Of-Network Health Care Costs. CHA opposes the bill.

Connecticut hospitals and health systems care for patients, strengthen the state’s economy, and support vulnerable communities across the state. Every day, they work to improve healthcare access, affordability, and health equity. Even as they face ongoing challenges, hospitals provide world-class care to everyone who walks through their doors, regardless of their ability to pay. Hospitals also support an exemplary workforce as the largest collective employer in the state, contribute significantly to the state’s economy, and invest in their communities addressing social drivers of health.

HB 6871 would cap out-of-network payment for hospital inpatient and outpatient services at 240% of Medicare or at a different amount determined by the Office of Health Strategy (OHS) through regulation.

Nearly ten years ago, the Connecticut General Assembly took action to limit the medical bills patients were receiving due to out-of-network care. Connecticut’s surprise billing legislation, which holds patients harmless for out-of-network emergency services and for non-emergency services provided by an out-of-network provider at an in-network facility, has largely cured the issue of out-of-network billing in Connecticut. Since then, federal legislation, the No Surprises Act, has been implemented and is a secondary means to ensure patients no longer experience the financial consequences of out-of-network, surprise bills.

As described in the governor’s fact sheet accompanying the bill, the real intent of HB 6871 is not to protect patients — they are already protected by state and federal law. Instead, the intent of HB 6871 is to favor national health insurance companies over Connecticut’s hospitals in commercial contract negotiations.

The legislation has everything to do with giving health insurance companies more leverage. If insurers have no incentive to avoid going out of network, they are empowered to strong-arm hospitals further into limiting reimbursements for in-network rates. This is a bold attempt by the government to insert itself in rate negotiations in favor of one side — insurers that count profits in the billions. At a time when hospitals are already struggling, this would jeopardize the ability to provide high-quality care. This truly is not a patient-focused policy. It is an insurer-focused policy.

Financial Consequences of Out-of-Network Price Caps

The consequences of the out-of-network price cap in HB 6871 would be damaging to many Connecticut hospitals and health systems and would jeopardize their financial recovery. Were such a cap in place, and in-network rates pushed closer to Medicare payments due to this policy, hospitals would lose hundreds of millions in commercial revenue.

Hospitals and health systems cannot sustain the robust healthcare delivery system that Connecticut residents enjoy if they cannot cover their costs. In 2023, hospitals began to show signs of financial recovery, although statewide operating margins remained negative and Connecticut hospitals still lost $76 million. Improvement in revenue continues to be outweighed by staggering increases in operating costs like drugs, supplies, and workforce costs (which grew by $1 billion in a single year). The proposed policy would undermine hospitals’ and health systems’ ongoing efforts to rebuild and recover their financial strength. And it would jeopardize their ability to maintain current levels of access to services for low-income populations.

Although HB 6871 requires these companies to pass on to consumers the savings generated by government-imposed price caps, it will be difficult, if not impossible, to quantify such impacts and hold them accountable for doing so.

Medicaid Underpayment and the Cost of Commercial Insurance

The role that Medicaid underpayment plays in the cost of commercial insurance needs to be addressed.
In the past several years, Medicaid underpayment in Connecticut has increased sharply, rising to $1.4 billion in 2023. Because of the role commercial insurance plays in cross-subsidizing Medicaid underpayment, these losses put significant pressure on negotiations with commercial health insurance companies.

Connecticut’s Medicaid shortfall is higher than most states and among the highest in the nation. In fact, according to OHS’s Hospitals’ Community Benefit Summary and Analysis Report 2022, Connecticut’s Medicaid shortfall as a percent of expenses is 79% higher than the national average. Medicaid underpayment is by far the most important factor to consider when comparing commercial prices between states.

There are, of course, other unreimbursed costs that hospitals must rely on commercial insurance to cover. In addition to the Medicaid losses noted above, Connecticut hospitals experienced more than $1.38 billion in Medicare losses and absorbed nearly $271 million in charity care and bad debt in 2023.

Hospitals are a major contributor to the health of Connecticut’s residents and its economy. Strong hospitals were essential during the pandemic. And they provide Connecticut residents with access to the highest quality of services. Hospital and health system margins have been lean over the past five to 10 years but sufficient to ensure access to world-class care with the resources to recruit and retain talent, invest in advanced technologies, and remain abreast of their peers in neighboring states and the nation. We need to ensure that hospitals can continue to provide quality care to all who need it and remain a strong and vibrant force in our local and state economies.

Thank you for your consideration of our position. For additional information, contact CHA Government Relations at (203) 294-7301.