ANALYSIS: Connecticut’s insurers are flexing their muscles at the statehouse

Introduction

Health care reform advocates in Colorado are not the only ones wondering what happened to the Democratic governor they elected in part because of his commitment to health care reform.

Advocates in Connecticut are likewise feeling betrayed by a governor who suddenly seems to be the insurance industry’s new best friend.

I wrote last week that at least two consumer organizations in Colorado are calling for the resignation of one of Gov. John Hickenlooper appointees to the newly created board that will oversee the state’s health care exchange; the exchange is a virtual marketplace, mandated by the federal reform law, where individuals and small businesses can shop for health insurance.

Instead of ensuring that the governing board of the Colorado exchange be controlled by people without ties to the insurance industry, Hickenlooper shocked reform advocates by naming executives of two of the state’s largest insurers to the board, along with an executive of a firm that does almost all of its business with insurers. Legislative leaders also appointed industry executives to the board. All told, five of the nine board members are either employed by insurers or are closely allied with them.

Nearly 2,000 miles to the east, many reform advocates in Connecticut are also feeling buyer’s remorse after watching Gov. Dan Malloy seemingly abandon his campaign pledge to more aggressively oversee private insurers as well as his support for a proposed state-based public insurance option called SustiNet.

Malloy spoke favorably of SustiNet when he was running for governor last year and even picked State Comptroller Nancy Wyman, who served on the board that developed the SustiNet plan, as his running mate for lieutenant governor. Both were elected.

Soon after he was sworn in earlier this year, however, he started backpedaling, questioning the cost to the state of moving forward with SustiNet.This came as a complete surprise to his supporters, who began to suspect that Malloy was being pressured to back away from SustiNet by the powerful insurance industry in Hartford, which employs several thousand Nutmeggers. Insurance company executives began playing the jobs card, intimating that implementation of SustiNet would make it necessary for them to lay off workers and maybe even leave the state.

Malloy undoubtedly felt he had no choice but to listen to what the insurers had to say. Not only was he facing a crushing budget deficit, he also had to deal with an unemployment rate that since February has been slightly higher than the national average.

Even so, reform advocates felt he would ultimately come through for them and sign any legislation reaching his desk that would increase the number of people with health insurance and bring down costs—as SustiNet’s developers said it would do—while requiring insurers to publicly justify hefty rate increases of more than 10 percent.

Connecticut lawmakers ultimately passed measures that would do all of that, but Malloy only signed one—the bill establishing the state’s exchange.

Insurers and their allies in Connecticut mounted a major campaign against SustiNet, just as they did at the national level against a public insurance option that would have been run by the federal government. The industry’s efforts paid off in Washington when Senate leaders gave up trying to pass a reform bill that contained a public option provision, even though the bill passed by the House did have such a provision. Consequently, there was no mention of the public option in the bill that ultimately reached President Obama’s desk.

In Hartford, insurers—with much help from a conservative, free-market, anti-regulation think tank called the Yankee Institute—scared lawmakers away from moving forward with funding to begin implementing SustiNet this year. What the legislature did pass was a broad reform-related bill that, among other things, set up a SustiNet “cabinet,” the primary responsibility of which is to draft a business plan to explore alternatives to the state’s current health care system, including a public option.

Malloy didn’t like the bill and refused to sign it, although he did let it become law without his signature.

He showed no such tolerance, however, for the bill that would make insurers justify their rate increases of 10 percent or more. Had the bill been enacted, consumers in Connecticut would have been allowed to submit both written and verbal testimony to be considered by the state’s insurance commissioner when deciding if a rate increase was justified. Insurers hated the bill, and Malloy vetoed it.

In the end, there was some good news. The bill Malloy signed establishing the state’s exchange promises to be much more consumer-focused than the one in Colorado. Connecticut lawmakers decided to go against the industry’s wishes and drafted legislation that prohibits anyone currently employed by insurers to sit on the exchange board.

So while insurers fell short of getting everything they wanted in Connecticut, they clearly owe Malloy a debt of gratitude for helping to slow down the move toward a public option and for killing the bill that would have made them justify their rate increases.

They already appear to be paying Malloy back. Just last week, CIGNA announced it would move its headquarters from Philadelphia to Connecticut and hire 200 workers over the next few years.

Malloy and CIGNA staged a big PR event to announce it. Of course.