Insurance Basics

Health insurance covers the costs of medical care, after the patient pays their share through copays, deductibles, and/or coinsurance. Insurance in Connecticut is expensive, driven up by high prices for drugs and care from huge health systems. The state regulates monthly premium increases for some insurance plans. Lower wage workers pay more for their insurance but get less. However, there is help paying premiums for lower income state residents.

Private insurance in Connecticut is more comprehensive than most states, but covers less than Medicaid. Insurers are offering consumer-directed, high deductible, and level-funded plans as more affordable options, but they have drawbacks.

Insurance is important to Connecticut’s economy, but four times as many workers are employed in providing healthcare than insurance. Insurance companies gained large profits during COVID and still do.

Insurance Deeper Dive

What is the purpose of health insurance?

Health insurance covers medical bills, but usually not the total cost and not necessarily for all medical services.

About one in three Connecticut residents with private insurance are in a “fully-insured” plan. In these plans, individuals or their employers pay an insurance company a monthly premium. In return, insurers cover the member’s medical costs after members pay their share. This is called“fully insured” coveragebecause the insurer is at financial risk for medical costs.

For the other two thirds of Connecticut residents with private insurance, their employer directly pays their medical bills, after the member pays their share.  In these “self-insured” plans, the insurer on the insurance card just manages the benefits. The insurance company is not at financial risk for medical costs. Usually, members don’t know if they are in a fully insured or self-insured plan.

In either type of plan, members’ out-of-pocket costs can include deductibles, copays, and/or co-insurance, in addition to monthly premiums.

People without insurance are responsible for paying all their medical bills themselves.

What does health insurance cover?

Under the federal Affordable Care Act, health insurance must cover essential services.

Under the law, these include:

• Hospitalizations
• Outpatient care such as office visits
• Prescription drugs
• Emergency services
• Pregnancy, maternity, and newborn care
• Mental health and substance use treatment
• Lab tests and services
• Preventive care to keep patients well
• Care to manage chronic conditions and maintain health 
• Rehabilitative services

The state of Connecticut also requires some insurance plans to cover other services, such as:

• Coverage for newborns
• Prosthetic devices
• Services provided by chiropractors, physician assistants, nurse practitioners, and some nurses
• Autism spectrum disorder services
• Pain management
• Wheelchair repairs
• Diabetes care
• Hearing aids
• Lyme disease treatment
• Infertility treatment
• Ambulance services
• Telehealth care
• Cancer screenings

Other services that aren’t required but may be covered:

• Adult vision, hearing, and dental care
• Alternative medicine such as acupuncture, massage, or herbal healing
• Cosmetic and other elective surgeries

If I’m healthy, why should I have health insurance?

Nineteen out of twenty Connecticut residents have health coverage and most of them are healthy.

Health insurance protects both people’s health and their finances. Having coverage makes it easier to get appointments for care – both when people are ill and for preventing health problems. Uninsured Americans, without private insurance or other coverage, are five times more likely to delay seeking care for a problem due to cost. Unfortunately, when they are diagnosed, the problem has become more difficult and more costly to treat. Preventive care is free under the Affordable Care Act, but only with insurance.

In 2021, fourteen million American adults had medical debt over $1,000 and three million owed over $10,000. Unexpected medical bills for even small emergencies can be thousands of dollars. Emergency Room visits in Connecticut can cost as much as $11,014. An average hospital stay costs $14,567 per day in Connecticut. Creditors can attach your wages and savings and place a lien on your car or home to cover medical bills. Savings for education, retirement, or buying a home as well as your credit score could be at risk.

The state’s Covered Connecticut program offers no-cost insurance coverage options for people with qualifying incomes. Even if your income is higher, you may qualify for significant discounts on health insurance, under the Affordable Care Act. Go to Access Health CT to find out more..

What is cost sharing?

Cost sharing is the part of medical bills that patients are responsible for. They can include deductibles, copays, and coinsurance, though few plans include all three types of cost sharing, but almost all include at least one. Cost sharing does not include premiums or the costs of care that isn’t covered by the insurer. This can be very confusing, but a good explainer video is here.

It’s very important to note that, under the Affordable Care Act, preventive care must be covered by insurance with no cost sharing, meaning at no cost to you.

Copays or copayments – This is a set fee patients pay directly to their provider for non-preventive care. The insurer directly pays the provider the remainder of the bill. In 2020, 54% of insured Connecticut residents with employer-sponsored insurance coverage had a copay requirement that averaged $28.77 for an office visit. For drug costs, 74% of employer-insured state residents had a copay requirement for prescription drugs that averaged between $10 for generics and up to $70 for costly, specialty drugs.

Deductible– This is the amount patients must pay toward medical bills before the insurer starts making payments. Deductibles generally start at the beginning of the plan year, often January 1^st, and reset back again the next year. For example, if a patient’s deductible is $1,976, the 2020 average in Connecticut for single coverage, they must pay the full cost of all medical care they receive starting in January until the total reaches $1,976. After that point, the insurer will begin covering medical bills above other cost sharing responsibilities such as copays and coinsurance. In 2020, almost all (93.5%) Connecticut residents with employer-sponsored insurance had a deductible in their plan, averaging $1,976 for individual plans and $3,520 for family plans. Nationally, deductibles have grown much faster than premiums.

Coinsurance– A percentage of medical bill costs that patients are responsible for, after paying their full deductible. In 2020, most (75%) employer-insured Connecticut residents had co-insurance responsibilities for hospital admissions, that averaged 18% of the total bill.

Cost sharing is not keeping up with wages. Between 2010 and 2020, average Connecticut deductibles for single and family plans increased 65% and 53%, respectively. Over those years average wages for Connecticut workers grew only 3.1%.

Insurance plans tradeoff patient cost sharing with premiums. This means plans with higher deductibles have lower monthly premiums and vice versa. Between 2008 and 2019, deductibles grew much faster than insurance premiums, shifting more costs onto consumers and away from employers and insurers.

Who has private insurance?

Most Connecticut residents continue to receive coverage through an employer-based insurance plan, although that proportion has been slowly declining for over a decade. Connecticut residents are slightly more likely to have employer coverage than other Americans.

One in eight state residents buy private insurance directly – either through AccessHealthCT, Connecticut’s health insurance exchange or independently through a broker or insurer. That number has grown since passage of the Affordable Care Act, as AccessHealthCT offers federal subsidies on health insurance premiums for people with incomes that qualify.

Both US and Connecticut employer-based coverage rates have been slowly declining, beginning with the 2008 recession. Implementation of the Affordable Care Act in 2014 had little or no effect on the rate of employer-based coverage.

Most people in Connecticut with private insurance coverage are insured through Anthem. Other plans include Cigna, Aetna, ConnectiCare, and United Healthcare.

How much does private insurance cost in CT?

Health insurance premiums are expensive in Connecticut. In 2024, our employer-based premiums for individual and family coverage were the tenth and sixth highest among states, respectively.

Insurance premiums for employer-based coverage have grown far faster than inflation, both in Connecticut and the nation.

Low income Connecticut residents pay more for health insurance but get less

When they are offered health benefits by their employer, Connecticut workers with the lower wages are charged more for less, according to an analysis of 2021 federal Medical Expenditure Panel data. The lowest wage workers in Connecticut were less likely to be offered health benefits, were offered less generous plans, and had to pay more for coverage than higher income workers.

Despite getting less generous coverage, Connecticut’s lowest wage workers paid $1,222 more for single coverage and $4,064 for family coverage.

Connecticut workers in the lowest wage quartile are about a third less likely to work for a company that offers health benefits, about a third less likely to be eligible for the benefit, and another third less likely to take up an offer from their employer than the highest wage workers.

Source: Low wage Connecticut workers pay more but get less health benefits, CT Health Policy Project, March 2023

Low wage Connecticut workers’ health plans are less generous than high wage workers, averaging $1,775 less for single coverage and $3,835 less for family plans. However, because low wage workers pay over twice the share of those plans as high income workers, they spend $1,222 more for single coverage and $4,064 for family plans.

Source: Low wage Connecticut workers pay more but get less health benefits, CT Health Policy Project, March 2023

It’s important to note that many low-income Connecticut residents qualify for free plans or substantial subsidies for health insurance. Consumers can only get insurance subsidies and cost sharing protections if they purchase coverage through the exchange. Go to AccessHealthCT to learn more.

Why is insurance so expensive?

Insurance rates reflect the cost of medical care – hospital, physician services, and drug costs – which have been rising much faster than inflation. High prices explain most of the rise in healthcare costs, especially in private health plans. Private health insurance prices in Connecticut are more than double what Medicare pays.

The most important driver of high premiums are steep rises in prices for healthcare services. Utilization of services in Connecticut and nationally is not up. While our aging population is a contributor, it doesn’t explain the increase in costs. Chronic conditions like asthma and diabetes are up as well, but they also don’t fully explain the rise in costs. COVID had a big impact, but only for a few years.

The loss of competition in healthcare markets is driving up prices. Healthcare prices for the same services vary significantly between providers and between payers, with no connection to the quality of care. As hospitals, physician practices, and other providers consolidate into large health systems, they come to dominate local healthcare markets, creating monopolies. Unlike Medicaid and traditional Medicare, that have the authority under law to set prices for providers, insurers must negotiate prices with health systems. Large, monopoly health systems can demand higher prices, which are passed on to consumers in higher premiums and cost sharing. Three lawsuits have been filed against Hartford Healthcare for anti-competitive behavior that is increasing premiums and health costs for all Connecticut residents. Other developed countries, where prices are regulated, spend far less on healthcare than Americans. 

Prescription drug prices are also driving up healthcare costs, nationally and in Connecticut. Americans spend more per capita on prescription drugs than all other developed countries. On average, US prices for prescription drugs are almost twice the prices paid in other countries, after accounting for rebates and other discounts.

Healthcare administration costs are up, but it’s not a major driver of healthcare costs. Insurers’ spending on administration, including profits, is limited by the Affordable Care Act.

Expansions of benefits and legislative mandates to cover essential services have added very little to the cost of insurance. Most mandated services, especially the costly ones, have always been included in most insurance plans.

How can people get subsidies to make insurance affordable?

Federal subsidies to make health insurance more affordable passed in the Affordable Care Act, were expanded during COVID, and were extended through the end of 2025. However, as of this writing (September 2025), it is unclear if they will continue into 2026.

The state added to the federal subsidies, creating the Covered Connecticut program. The program offers zero-cost insurance for state residents with qualifying incomes. Even higher income Connecticut residents may qualify for significant discounts on health insurance under the Affordable Care Act. Consumers can only get insurance subsidies and cost sharing protections if they purchase coverage through AccessHealthCT, Connecticut’s health insurance exchange. Go to Access Health CT to find out more.

AccessHealthCT is a very helpful portal into all health insurance subsidy programs. They can also assess eligibility for Medicaid. Over 100,000 state residents have insurance coverage through AccessHealthCT.

How does private insurance work?

Health insurance is different than other kinds of insurance such as home or life. Home insurance costs vary depending on the home’s value and life insurance varies by the insured’s age. But under the Affordable Care Act, health insurance must cover preventive care with no cost to patients and cannot charge more based on your health risks such as pre-existing conditions or gender. Health insurers are also not allowed to refuse you coverage or refuse to renew your coverage, as home and life insurers can.

Health insurance works by pooling monthly premiums paid by a large number of insured people and using that pool to pay medical bills for the few people in the pool who experience high health costs. Those costs can arise from an unforeseen illness or injury, or for ongoing chronic conditions. Health insurers profit by keeping their pool members healthy, so preventive and maintenance care, such as vaccinations and checkups, are also covered. In addition to monthly premiums, insured patients are expected to share the costs of care with copayments, deductibles, and/or coinsurance.

However, pools need a fair balance of mostly healthy people paying in to cover the costs of the few who need more care. Health plans have an incentive to attract healthier, lower cost people into their pool, and exclude less healthy, higher cost members. This is called “adverse selection”. Adverse selection also happens when consumers wait to sign up for insurance until they know they are ill or at risk of health problems.

When pools tip out of balance, they can enter a death spiral. This happens when there are too many people with high healthcare costs and too few healthy members to pay the bills. Because premiums are set based on medical costs, as those costs rise, premiums go up. Higher premiums encourage more healthy members to drop out of the pool and the cycle continues until the pool is no longer sustainable.

Connecticut experienced a death spiral with the Charter Oak Plan. Governor Rell created the Charter Oak Health Plan in July 2008 to leverage the state’s Medicaid program to provide Connecticut’s uninsured with affordable coverage. Monthly premiums started at $257 per member per month, with subsidies for lower income applicants. Unlike Medicaid, Charter Oak included copays, deductibles, and co-insurance costs for consumers, in addition to monthly premiums, but was available regardless of pre-existing conditions. Because of those consumer costs and limited provider participation, by March 2013 Charter Oak had attracted higher cost members, healthier members dropped coverage because premiums jumped, enrollment had declined by 61% from its highest point, and premiums more than doubled. Eventually enrollment in Charter Oak dropped and the program ended January 1, 2014.

What are consumer-directed health plans? Can they lower costs?

Created in 2003, consumer directed health plans combine high deductibles with special tax-advantaged savings accounts to offer lower cost plans. The idea is to give people a more affordable insurance option with lower monthly premiums. The associated savings accounts allow employees and employers to add money to a bank account, shielded from income taxes, that the member can use to pay for some of their cost-sharing for medical care. The hope was that when consumers are paying for care directly with their own money, they would shop around for better prices and would be less likely to access care they don’t need.

In practice, consumer directed health plans largely appealed to higher income members, who can afford to put money in a savings account, and healthier members, with lower overall health costs. People at lower incomes or people with higher medical bills did not save money in consumer-directed health plans, continued to rely on traditional insurance plans, and consequently, premiums rose in those insurance plans. Researchers found that people in consumer-directed health plans were not able to shop around for prices, but just reduced their use of both necessary and unnecessary care. In 2020, high deductible plan savings accounts cost the US government $12 billion in lost taxes. Over half (54.3%) of Connecticut residents with private insurance were in a high-deductible health plan in 2020.

There is also evidence that high-deductible plans increase health disparities.

How is insurance regulated?

The Affordable Care Act made important changes to regulations governing insurers including:

• Insurers may not base premiums on pre-existing medical conditions — such as heart disease, diabetes, or a history of cancer
• Insurers can only base premiums on age (within limits) and geography
• Sets a minimum medical loss ratio – Insurer spending on administration, profits, and quality is limited to 20% of total premiums collected for individual and small group plans (50 or less members) and 15% for larger groups
• Children can stay on their parents’ plans until age 26
• Insurers must offer health insurance to anyone who applies, and must renew coverage
• Insurers cannot set annual or lifetime dollar limits on healthcare bills
• Sets limits on deductibles and maximum out-of-pocket costs for consumers in ACA plans, AccessHealthCT in Connecticut, updated each year
• The waiting period for health benefits to start after employment must be 90 days or less
• Sets ten essential benefits that must be covered under any plan
• Insurance documents must be available to members in plain language
• Employers with over 50 full-time workers must offer health benefits or pay a fine
• Created consumer assistance programs in every state – Anyone in Connecticut experiencing problems with insurance can contact our state Office of Healthcare Advocate.

There are two types of private insurance – fully-insured and self-funded plans. In self-funded plans, employers pay all the medical bills for employees, minus the workers’ contributions. The employer is at financial risk if workers’ healthcare costs are high. Self- funded plans are regulated at the federal level by the US Department of Labor; they are not subject to state laws. Recently, federal regulators have strengthened self-funded plan responsibility to their employee plan members to act solely in their best interests. The new emphasis is strengthening employers’ responsibility to get the best care at the best price.

In 2020, 64% of Connecticut residents with private insurance coverage were in a self-funded plan, higher than the US average of 58%. Connecticut workers in companies with over fifty employees were three times more likely to be in a self-funded plan than workers from companies with under fifty employees.

In fully-insured plans, individuals or small employers pay premiums to an insurance company, and that company is responsible for all medical bills, meaning they accept the financial risk if healthcare costs are high.

Fully-insured plans are regulated by the Connecticut Insurance Department (CID). The department has responsibility, among other things, for approving the premiums that fully insured plans can charge. Each year, insurers must submit their proposed premiums for the next year. CID reviews the proposals to determine if the rates are “excessive”, “inadequate”, or “unfairly discriminatory” and approves or disapproves them. They may call for a public hearing to gather input to help them in their decisions. It is important to note that the law does not allow CID to consider affordability for consumers or employers in their decisions.

For 2026, insurers asked for an average rate increases of 17.8% for individuals and 13.1% for small groups. The Department of Insurance lowered that to 16.8% for individual plans and 11% for small groups.

CID also ensures that health plans have enough funds in reserve to cover unexpected costs, for instance from a pandemic. CID also licenses plans, investigates insurance scams, and enforces the state laws that protect consumers. CID also publishes a very helpful annual report card on health insurers’ quality performance, the number of providers in their plan, and how to contact the companies.

In contrast, self-funded plans are regulated less closely by the federal Department of Labor, under a very confusing federal law, ERISA, which passed in 1974 mainly to protect retirement benefits.

In self-funded plans, a health insurance company may manage the bills, pay providers, and enroll employees, but they are acting on behalf of the employer who is at financial risk for the costs of medical care. Employees may not know if they are in a self-funded or fully-insured plan. This matters because they have different rights and protections under law and need to contact different agencies with complaints. Anyone experiencing problems with insurance can contact the state Office of Healthcare Advocate.

For more information, go to this helpful guide on states’ health insurance regulation including Connecticut’s system.

What are level-funded plans for small businesses and can they help lower costs?

Level funded plans are relatively new insurance products. They are self-insured small group plans and they are growing quickly, according to the latest numbers from the Connecticut Insurance Department (CID). The plans save money for some small businesses, but they have serious risks.

Connecticut’s small businesses are struggling. Inflation, tariffs, and labor shortages are serious challenges, but rising healthcare costs are crushing them. Premiums are scheduled to rise by double digits next year. Self-funded small business health plans offer relief for some companies if their workers are generally healthy. But groups that include older workers, people with disabilities, and communities of color could be left out.

In traditional fully-insured plans, insurers get regular premium payments from employers and workers. If medical costs exceed the premiums paid, insurers must cover the excess and can’t raise the group’s premiums next year to make up the difference. But in self-funded plans, employers pay all their workers’ medical bills directly; insurance companies just administer the plan for the employer. Insurance companies collect premiums from employees to cover the expected medical costs of the small business’s workers. If premiums don’t cover the bills, the business is on the hook. In a big company with a lot of workers, one cancer diagnosis or serious accident wouldn’t have a big impact on the entire company’s healthcare costs. But medical bills for just one person could bankrupt a small company. Until recently, small business owners wouldn’t have taken on that risk, and very few did.

However, in 2019, insurers started selling cheaper “level-funded” plans to small businesses, in Connecticut and across the US. These are self-funded plans that keep premiums stable across the year by building in stop-loss insurance (also called reinsurance) to cover high medical bills over a threshold. This helps keep costs stable for the years when nothing bad happens. But if a high-cost medical issue happens, the next year rates go up sharply.

Under federal law, self-funded plans operate outside the protections in the Affordable Care Act (ACA) or state laws and regulations. Self-funded plans can refuse to cover pre-existing conditions, and don’t have to cover essential medical services.

Connecticut’s small businesses have been signing up for these level-funded plans in droves, growing from 3% to 28% of small group enrollment in five years.

Policymakers are concerned that level-funded plans will siphon off healthier groups from the rest of the small group market. This could leave out small companies that hire workers with more healthcare needs, including people who are older, disabled, or from communities of color, raising costs in the fully-insured market that they rely on.

Another concern with level-funded plans is that they do nothing to address the drivers of rising healthcare costs for all plans – high prices for drugs and services at huge monopoly health systems.

How do insurers pay providers?

Unlike Medicare and Medicaid, private insurers negotiate payment rates with providers. As healthcare markets consolidate into monopolies, insurers have less leverage to keep prices down. In contrast, physician payments in Medicare are based on the costs of providing each service to patients, adjusted for some provider expenses. Nationally, private insurers pay hospitals twice Medicare’s rates on average and 43% more for physician services. Private insurance companies’ price negotiations with health systems and other providers are not public.

A study by RAND analyzing provider payments rates for commercial plans finds Connecticut’s 2022 rates averaged two and half times (258%) what Medicare would’ve paid for the same services at the same hospital (Relative Price). There was little variation by overall type of services. However, individual Connecticut hospitals varied considerably in Relative Price. There was no correlation between higher prices and higher quality, based on CMS quality star ratings. Contrary to common mythology, this study, like many others, found high commercial prices are not driven by cost shifting due to lower Medicaid and Medicare payments.

To lower insurance premiums, there are efforts to link private insurers’ rates to Medicare payment levels, called “reference pricing”. It’s estimated that private insurance costs would have been $352 billion lower in 2021 using Medicare payment rates. There are concerns that lowering insurers’ payment rates will reduce access to care, but the large majority of physicians accept the lower Medicare rates. Only 1.5% of Connecticut physicians opted out of Medicare in 2024.

In 2016, Montana’s state employee plan switched from negotiating hospital payment rates to reference pricing using Medicare rates as a benchmark. While there was serious resistance from a few hospitals, all eventually signed onto the new program, and none are out of business. Before the switch Montana was paying up to 322% of Medicare rates for some services. Between 2017 and 2019, the state saved $47.8 million.

Is insurance a big part of Connecticut’s economy?

Connecticut is important to the US insurance industry. Several large insurers have headquarters in our state. Connecticut leads the nation in insurance employment and payroll and is first in the percent of our state’s economy devoted to insurance. We are third in the nation in total direct premiums.

However, insurance employs a small minority of workers in Connecticut. In March 2025, insurance companies and related activities employed 56,000 Connecticut workers, according to Connecticut’s Department of Labor. That is one in thirty workers in the state. In comparison, healthcare employed 223,100 state residents that month, or one in eight state workers.

How did COVID affect insurers?

At the beginning of the pandemic, there were concerns that healthcare costs would skyrocket (which they did), and insurers would not be able to cover the costs (which didn’t happen), and would have to jack up premiums in future years, which they have done.

In fact, insurers did very well during the pandemic. They were so profitable that they were required, under the ACA, to return money to consumers and employers. Because of the lockdown, many Americans went without or delayed non-emergency medical care, which lowered insurer’s costs. The federal government also poured money into the healthcare system which indirectly lowered insurers’ costs. In 2021, Connecticut individual insurance was the 15th most profitable among states, well above the US average. And their profits grew again in

US health insurers made $31 billion in profits in 2020 and another $19 billion in 2021. For 2026, insurers asked for an average rate increases of 17.8% for individuals and 13.1% for small groups. The Department of Insurance lowered that to 16.8% for individual plans and 11% for small groups.

Is Connecticut working on a public option?

Creating a public health insurance option in Connecticut has been proposed several times to bring down premiums. A public option is a health insurance plan sponsored and run by government. A national public option was removed from the Affordable Care Act negotiations to address concerns from the insurance industry of unfair competition. Other states are in the process of implementing public options based on private health insurance.

Connecticut has implemented several public option-related initiatives:

• MEHIP built on the state employee plan – started in 1996, was offered to municipal and nonprofit employee groups. It ended when premiums rose too high and enrollment dropped.
• Connecticut Partnership Plan, successor to MEHIP, also built on the state employee plan, has not expanded beyond municipal employees. Coverage is expensive and concentrated in Fairfield County. Concerns have been raised about the program’s finances, the state’s liability, and a lack of transparency.
• Charter Oak Plan — Built on the Medicaid managed care program, Charter Oak ended in a death spiral when premiums grew too high and enrollment dropped.

Most recently, in 2022 Connecticut legislators proposed to open the Partnership plan to small businesses. The bill was very controversial and died when Governor Lamont threatened to veto the bill if it came to him.

Updated September 29, 2025