Connecticut hospitals are pressing state officials to immediately disband the state's rate-setting system because of a federal court ruling that strikes down the state's system of shifting uncompensated-care costs to insured patients.
The state attorney general is seeking a stay of the decision while he appeals.
Meanwhile, there's much confusion and little consensus about how to react to the ruling. While some self-insured employers have decided to stop making contributions to the uncompensated-care fund, Blue Cross and Blue Shield of Connecticut said it will continue paying those charges.
The Connecticut Hospital Association has advised hospitals to keep the money they collect rather than pass it on to the state for redistribution, but the state rate-setting commission said that would be a violation of state law.
The Feb. 25 ruling by U.S. District Judge Jose A. Cabranes in New Haven declared the state's system of shifting uncompensated-care costs to all non-governmental payers in violation of the federal Employee Retirement Income Security Act. ERISA governs benefit plans such as those administered by unions and self-insured employers.
The ruling mirrors earlier federal court rulings that invalidated such cost-shifts in New York and New Jersey.
Connecticut hospitals generate $600 million annually-15% of their net revenues-through a sales tax and surcharge on hospital bills. The loss of those funds could force hospitals to reduce spending through layoffs, said Julie Cox, a spokeswoman for the Connecticut Hospital Association.
Deregulating rates would enable hospitals to charge what the market will bear and avoid ERISA violations, she said.
CHA's board wants to move toward a competitive system (Feb. 14, p. 34), and executives are hoping the judge's ruling will accelerate the process.
The suit was brought by District 1199 of the New England Health Care Employees Union, which represents 17,000 employees and dependents (Jan. 25, 1993, p. 10). Although the ruling directly relates to the $5 million paid by participants in the union's benefit plan, "the legal reasoning could be applied fairly broadly," said Dan Livingston, the union's attorney.