The Connecticut Individual Healthcare Responsibility Fee

Executive Summary: The paper proposes that all residents of the state of Connecticut take responsibility for their healthcare costs by contributing towards those costs if they are not already covered by public or private health insurance. Residents who choose not to participate will owe the same dollar amount (typically 9.66% of income) as a fee to the state to help cover the costs of care for the uninsured. This fee will deter uninsured residents from free-riding on Connecticut taxpayers. Because of ACA subsidies, lower income residents (those at 400% of the poverty level) already contribute 9.66% of income when they purchase through the state exchange. High income residents will be able to purchase insurance on the exchange at below this fraction of income. Middle-income residents, for whom the cost of insurance is above 9.66% of income, will instead contribute at that level to a Healthcare Savings Account out of which they can pay healthcare costs in current and future years. The proposal insures that all Connecticut residents have some access to healthcare and that all are paying an equitable share of costs. The federal government has eliminated the penalty for not having health insurance. The paper models the impact on participation in AccessHealthCT in the event that the state does not adopt a plan to encourage participation. Data suggest that the most healthy 30% of participants would leave the exchange, likely causing more than a $1000 increase in annual premiums for those that remain. By contrast, if a fee such as the one proposed is adopted, up to 60,000 additional residents could join AccessHealthCT. We estimate that this would drive down annual premiums by $300 due to scale effects, and possibly as much as $1000 due to the lower cost profile of the new enrollees.