Connecticut Attorney General Richard Blumenthal has indicated that he will seek to appeal a federal court ruling that renders the state's system of funding uncompensated care invalid.
Last week, the state also sought a clarification of the ruling to limit its applicability, according to the Connecticut Hospital Association, the plaintiff in the case.
The state attorney general's office and the Revenue Services Department did not return phone calls seeking comment on the case.
The Nov. 17 decision by U.S. District Judge Alfred Covello in Hartford found that the Employee Retirement Income Security Act pre-empts two taxes levied by the state to subsidize hospital care for the poor. The ruling outlaws a 6% sales tax on hospitals' nongovernmental gross revenues and an 11% tax on hospitals' gross revenues. The taxes now generate about $300 million, which is used to reimburse hospitals' uncompensated-care costs.
The state has indicated that it will seek a suspension of the ruling pending an appeal.
Judge Covello also ruled against a pending cap on hospital revenues, citing an ERISA violation. Under state law, the cap was to become effective on July 1, 1995.
ERISA is the 1974 federal law governing private payers' health benefit plans. In the past two years, union-sponsored benefit plans and insurers have filed numerous challenges of state cost-shifting mechanisms, contending that, under ERISA, they cannot be forced to pay for the care of people who aren't members of their plans.
The federal court's decision represents a victory for the 35-member Connecticut Hospital Association, which sought to have the taxes overturned on grounds that they violate ERISA. The CHA said its members didn't want to be responsible for refunding payers who might have succeeded in challenging the legality of the cost shift.
However, the court's expeditious ruling surprised the CHA, which had expected Judge Covello to delay his decision until the U.S. Supreme Court renders an opinion in a closely watched ERISA case. On Oct. 7, the high court agreed to hear the case, which challenges New York's practice of passing surcharges to privately insured patients' hospital bills (Oct. 17, p. 17).
The decision leaves the state without an alternative financing mechanism, and the CHA hasn't offered one. CHA President Dennis May said that will be the responsibility of Gov.-elect John Rowland, a Republican, and the state General Assembly.
Mr. May said the state has indicated that it will seek a clarification of the judge's ruling, seeking to limit its applicability to CHA's ERISA plan for its employees. But the CHA's interpretation of the ruling's impact is much broader. "We believe this ruling extends to all ERISA plans and extends to hospitals," he said.