HB 7126, An Act Concerning State Contracting For State Employee Health Insurance Coverage And Other Related Services

TESTIMONY OF THE CONNECTICUT HOSPITAL ASSOCIATION
SUBMITTED TO THE GOVERNMENT ADMINISTRATION AND ELECTIONS COMMITTEE

Friday, March 7, 2025

The Connecticut Hospital Association (CHA) appreciates this opportunity to submit testimony concerning HB 7126, An Act Concerning State Contracting For State Employee Health Insurance Coverage And Other Related Services.

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 7126 would require notification by a third-party administrator (TPA) hired to administer state employee and retiree health benefits prior to expiration of an agreement the TPA holds with a healthcare provider. It also requires notification when a healthcare provider is no longer participating in the TPA’s provider network. In the case where the TPA gives notice that a healthcare provider is no longer participating in the network, the Comptroller is required to find a new TPA through a competitive process and the existing TPA is barred from participating in that process.

While negotiations between payers and healthcare providers are often challenging, recently, these negotiations have become even more challenging as payers have increasingly refused to acknowledge and support the significant inflationary cost increases experienced by providers.

For hospitals, pressure to secure agreements with commercial payers that meet the cost of providing care is increased by annual underpayments by the state for care provided to Medicaid patients. 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.

Potentially further exacerbating this issue is the Governor’s proposed bill HB 6871, which 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.

The intent of HB 6871 is to favor national health insurance companies over Connecticut 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. If the underlying intent of HB 7126 is to ensure payers are negotiating fairly and to incent a negotiation that keeps provider networks whole, then the Governor’s proposed bill is working in direct opposition to that goal.

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 views. For additional information, contact CHA Government Relations at (203) 294-7301.