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General Assembly Substitute Bill No. 5041
February Session, 2026
AN ACT CONCERNING A STUDY OF A CONNECTICUT OPTION FOR
AFFORDABLE HEALTH CARE, HEALTH INSURER REQUIREMENTS
FOR CERTAIN GENERIC DRUGS, TAX CREDITS FOR SMALL
BUSINESS HEALTH CARE ARRANGEMENTS AND WORKER
PORTABLE BENEFIT ACCOUNTS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (Effective from passage) (a) As used in this section: 1
(1) "Affordable Care Act" means the Patient Protection and 2
Affordable Care Act, P.L. 111-148, as amended by the Health Care and 3
Education Reconciliation Act, P.L. 111 -152, as both may be amended 4
from time to time, and regulations adopted pursuant to said acts; 5
(2) "Connecticut Option program" means a standardized health 6
benefit plan designed by the state to reduce health care coverage costs 7
and made available through private or commercial insurance carriers to 8
individuals in the state; 9
(3) "Exchange" means the Connecticut Health Insurance Exchange 10
established under section 38a-1081 of the general statutes; 11
(4) "Health benefit plan" has the same meaning as provided in section 12
38a-1080 of the general statutes; 13
(5) "State innovation waiver" means a waiver of one or more 14
requirements of the Affordable Care Act authorized under section 1332 15
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of said act; and 16
(6) "Secretary" means the Secretary of the Office of Policy and 17
Management. 18
(b) The Secretary of the Office of Policy and Management shall, 19
within available resources, study the feasibility of establishing the 20
Connecticut Option program with the goal of reducing health insurance 21
premiums. The study shall include analyses, conclusions and 22
recommendations sufficient for the secretary, in consultation with the 23
Insurance Commissioner, to evaluate and compare design models for 24
the program. The study shall include, but need not be limited to: 25
(1) A review of the efficacy, impact and reasonableness of proposed 26
program design elements, including, but not limited to: (A) Provider 27
reimbursement methodologies; (B) value -based or performance -based 28
contracting arrangements; (C) enrollee cost -sharing and premium 29
affordability targets; (D) incentives or rewards for the delivery of high -30
quality, cost -effective health care; and (E) any state -specific premium 31
assistance programs or risk stabilization programs, including, but not 32
limited to, a state -operated reinsurance program that may maximize 33
available federal funding pursuant to a state innovation waiver; 34
(2) Identification of any necessary statutory or regulatory changes 35
required for implementation of the Connecticut Option program; 36
(3) Determination of staffing needs across state agencies to effectively 37
implement the Connecticut Option program; 38
(4) Analysis of the state insurance market and projected impacts of 39
the Connecticut Option program on persons who receive health care 40
coverage through the exchange; and 41
(5) Required state action or design elements needed to achieve 42
multiple premium savings targets. 43
(c) Not later than January 15, 2027, the secretary shall file an interim 44
report, in accordance with the provisions of section 11-4a of the general 45
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statutes, on the study conducted pursuant to subsection (b) of this 46
section with the joint standing committees of the General Assembly 47
having cognizance of matters relating to appropriations and the budgets 48
of state agencies, human services and insurance and real estate. Not later 49
than January 31, 2028, the secretary shall file a final report, in accordance 50
with the provisions of section 11 -4a of the general statutes, on the 51
feasibility of the Connecticut Option program and any 52
recommendations on implementing the program with the joint standing 53
committees of the General Assembly having cognizance of matters 54
relating to appropriations and the budgets of state agencies, human 55
services and insurance and real estate. 56
(d) If the secretary, in consultation with the Insurance Commissioner, 57
determines a Connecticut Option program is feasible after completion 58
of the study or related reports pursuant to subsections (b) and (c) of this 59
section, the secretary may direct the relevant state agency to develop 60
and implement a state innovation waiver or any applicable waiver from 61
federal law that may be required to maximize federal funding for the 62
program or any component part of a program design to help achieve 63
health care savings. 64
Sec. 2. (NEW) ( Effective January 1, 2027 ) As used in this section and 65
section 3 of this act: 66
(1) "Biological product" has the same meaning as provided in 42 USC 67
262; 68
(2) "Biosimilar" means any biological product that is licensed under 69
42 USC 262(k); 70
(3) "Brand-name drug" means a drug that is produced or distributed 71
in accordance with an original new drug application approved under 21 72
USC 355, as amended from time to time, but does not include an 73
authorized generic drug as defined in 42 CFR 447.502, as amended from 74
time to time; 75
(4) "Formulary" means a list of prescription drugs that are covered by 76
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a specific health insurance plan; 77
(5) "Generic drug" means (A) a prescription drug product that is 78
marketed or distributed in accordance with an abbreviated new drug 79
application approved under 21 USC 355, as amended from time to time, 80
(B) an authorized generic drug as defined in 42 CFR 447.502, as 81
amended from time to time, or (C) a drug that entered the market before 82
calendar year 1962 that was not originally marketed under a new 83
prescription drug product application; 84
(6) "Reference product" means (A) with respect to a generic drug, the 85
listed brand-name drug against which the generic drug is compared, in 86
accordance with 21 USC 355(j)(2)(A)(i); and (B) with respect to a 87
biosimilar, the reference biological product as defined in 42 USC 1395w-88
3a(c)(6)(I); 89
(7) "Wholesale acquisition cost" has the same meaning as provided in 90
42 USC 1395w-3a, as amended from time to time; 91
(8) "Health benefit plan" has the same meaning as provided in section 92
38a-1080 of the general statutes; and 93
(9) "Health carrier" has the same meaning as provided in section 38a-94
591a of the general statutes. 95
Sec. 3. (NEW) ( Effective January 1, 2027 ) (a) If a generic drug (1) is 96
approved by the United States Food and Drug Administration, (2) is 97
marketed pursuant to such approval, and (3) has a wholesale acquisition 98
cost that is less than the wholesale acquisition cost of the reference 99
product on the generic drug's initial date of marketing, a health benefit 100
plan issued or renewed on or after January 1, 2027, that provides 101
coverage for a reference product at the time of the generic drug's 102
marketing date shall make the generic drug available on such health 103
benefit plan's formulary with lower cost sharing, including actual out -104
of-pocket costs, relative to the reference product. 105
(b) If a biosimilar (1) is licensed by the United States Food and Drug 106
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Administration, (2) is marketed pursuant to such licensure, and (3) has 107
a wholesale acquisition cost that is less than the wholesale acquisition 108
cost of the reference product of such biosimilar on the initial date of 109
marketing, a health benefit plan issued or renewed on or after January 110
1, 2027, that provides coverage for the biosimilar's reference product at 111
the time of the biosimilar's marketing date shall make at least one 112
biosimilar available on the formulary on a tier with lower cost sharing, 113
including actual out-of-pocket costs, relative to the reference product. 114
(c) Subsections (a) and (b) of this section shall apply as long as the 115
wholesale acquisition cost of the generic drug or biosimilar is lower than 116
the wholesale acquisition cost of the reference product. 117
(d) A health benefit plan may not restrict the pharmacies through 118
which enrollees may obtain the generic drug or biosimilar, unless the 119
same restriction applies to the reference product. 120
(e) If a generic drug or biosimilar has a lower wholesale acquisition 121
cost than its reference product, and neither the generic drug or 122
biosimilar nor the reference product is included on the health benefit 123
plan's formulary, the health benefit plan issued or renewed on or after 124
January 1, 2027, shall not impose a more restrictive formulary exception 125
process for the generic drug or biosimilar than for the reference product. 126
(f) Nothing in this section shall: 127
(1) Require a health benefit plan to provide coverage for a reference 128
product after a generic drug or biosimilar is approved or licensed, as 129
applicable, and marketed; 130
(2) Require a health benefit plan to provide coverage for a brand -131
name drug, biological product, generic drug or biosimilar if there is a 132
determination by the pharmacy and therapeutics committee that 133
develops the plan's formulary that such drug or biological product is no 134
longer medically appropriate or cost-effective; or 135
(3) Interfere with the ability of a pharmacy or pharmacist to comply 136
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with the provisions of chapter 400j of the general statutes. 137
(g) The Insurance Commissioner may adopt regulations, in 138
accordance with the provisions of chapter 54 of the general statutes, to 139
implement the provisions of this section. 140
(h) The requirements of this section: 141
(1) Apply only with respect to coverage of and cost sharing for 142
generic drugs, biosimilars and brand -name drugs when dispensed by 143
pharmacies as outpatient prescription drugs and do not apply to generic 144
drugs, biosimilars or brand -name drugs when provided by a hospital, 145
physician or other provider of health care or palliative services, other 146
than a pharmacy, incident to the services of such provider and paid for 147
by or on behalf of the relevant health benefit plan as part of the payment 148
for such services under the medical benefit of the health benefit plan; 149
(2) Do not apply to the extent that they would require coverage by a 150
health benefit plan or enrollee cost sharing for a generic drug or 151
biosimilar that is not permitted under any applicable federal law or any 152
law of this state; and 153
(3) Do not require that a health benefit plan include on its formulary 154
a generic drug or biosimilar if the health carrier has not included the 155
reference product for that generic drug or biosimilar on its formulary 156
due to a determination by the pharmacy and therapeutics committee for 157
the health benefit plan that the brand-name drug should not be covered 158
due to clinical concerns about the safety or efficacy of the brand -name 159
drug based on the strength of scientific evidence. 160
Sec. 4. (NEW) (Effective from passage and applicable to income and taxable 161
years commencing on or after January 1, 2026)(a) As used in this section: 162
(1) "Commissioner" means the Commissioner of Revenue Services; 163
(2) "Department" means the Department of Revenue Services; 164
(3) "Income year" means the income year or taxable year, as 165
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determined under chapter 207, 208 or 229 of the general statutes, as the 166
case may be; 167
(4) "Qualified small business" means an employer in the state that (A) 168
is subject to tax under chapter 207, 208 or 229 of the general statutes, (B) 169
employs fewer than fifty employees in the state on the date of its 170
application under subsection (c) of this section, and (C) has adopted an 171
individual coverage health reimbursement arrangement, as described in 172
Section 9831(d) of the Internal Revenue Code, in lieu of a traditional 173
employer-provided health insurance plan; 174
(5) "Qualified contribution" means a contribution by a qualified small 175
business toward a covered employee's individual coverage health 176
reimbursement arrangement during the income year; and 177
(6) "Covered employee" means an employee for whom the qualified 178
small employer made a qualified contribution toward an individual 179
coverage health reimbursement arrangement during the income year. 180
(b) (1) There is established an individual coverage health 181
reimbursement arrangement tax credit for qualified small businesses 182
whereby a qualified small business may be allowed a tax credit against 183
the taxes imposed under chapter 207, 208 or 229 of the general statutes, 184
other than the liability imposed by section 12-707 of the general statutes. 185
(2) The amount of the credit allowed for an income year shall be equal 186
to the lesser of: (A) The sum of qualified contributions made by the 187
qualified small business during the income year, or (B) one thousand 188
dollars per covered employee. Any tax credit not used in the income 189
year during which it was earned shall expire and shall not be 190
refundable. 191
(3) A credit under this section may be allowed to a qualified small 192
business for the first income year during which the business offered an 193
individual coverage health reimbursement arrangement and the 194
immediately succeeding income year. No credit shall be allowed for any 195
other income year. 196
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(c) (1) Any qualified small business planning to claim a credit under 197
the provisions of this section shall apply to the commissioner, in such 198
form and manner prescribed by the commissioner, to reserve an 199
allocation for a credit based upon the qualified contributions the 200
business intends to make. Such application shall indicate the amount of 201
qualified contributions that the business intends to make in the first 202
income year during which it offers an individual coverage health 203
reimbursement arrangement and the immediately succeeding income 204
year. The application shall contain such information as the 205
commissioner deems necessary to administer the provisions of this 206
section. 207
(2) The commissioner shall approve applications for the reservation 208
of a credit on a first -come, first -served basis and shall notify the 209
qualified small business in writing not later than thirty days after the 210
date of receipt of an application of the commissioner's approval or 211
rejection of the application. If the commissioner approves the 212
application of the qualified small business, the commissioner shall issue 213
a certification letter indicating the amount of the tax credit that has been 214
reserved for such business during each of the two income years for 215
which it is eligible to claim the credit. A qualified small business may 216
not claim a credit under this section in excess of the amount reserved by 217
the commissioner. 218
(3) The total amount of tax credits reserved under this section shall 219
not exceed five million dollars for any income year. 220
(d) If the qualified small business is an S corporation or an entity 221
treated as a partnership for federal income tax purposes, the tax credit 222
may be claimed by the shareholders or partners of the qualified small 223
business. If the qualified small business is a single member limited 224
liability company that is disregarded as an entity separate from its 225
owner, the tax credit may be claimed by the limited liability company's 226
owner. 227
Sec. 5. (NEW) (Effective October 1, 2026) (a) As used in this section: 228
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(1) "Hiring party" means an entity who hires or enters into a contract 229
with an eligible worker; 230
(2) "Eligible worker" means an individual whose compensation is 231
reported or required to be reported on an Internal Revenue Service Form 232
1099 by a hiring party; 233
(3) "Portable benefit account" means an account owned by a person 234
that is administered by a portable benefit account provider for the 235
purposes of purchasing health insurance and health-related expenses by 236
an eligible worker; and 237
(4) "Portable benefit account provider" means (A) a bank, (B) an 238
investment management firm, or (C) a technology provider or program 239
manager that offers services through a bank or investment management 240
firm. 241
(b) Any hiring party may contribute to one or more portable benefit 242
accounts as a form of compensation to an eligible worker. 243
(c) Making or receiving contributions to a portable benefit account 244
shall not be used as a criterion for determining a worker's employment 245
classification pursuant to any provision of the general statutes. 246
(d) Hiring parties may withhold a percentage of funds owed in 247
compensation to an eligible worker for deposit into a portable benefit 248
account if (1) withholding such compensation is agreed to in writing 249
between the hiring party and the eligible worker; (2) the eligible worker 250
voluntarily enters into such an arrangement; and (3) the written 251
agreement clearly outlines the process to end the arrangement to 252
withhold owed compensation to the eligible worker. 253
(e) At any time, an eligible worker may opt out of a compensation 254
withholding arrangement by notifying the hiring party in writing. 255
Hiring parties shall return all withheld compensation owed to any 256
eligible worker not later than fifteen days after the hiring party is 257
notified in writing of the eligible worker's decision to terminate the 258
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withholding arrangement. 259
Sec. 6. Section 19a -754c of the general statutes is repealed and the 260
following is substituted in lieu thereof (Effective from passage): 261
(a) For the purposes of this section: 262
(1) "Affordable Care Act" has the same meaning as provided in 263
section 38a-1080; 264
(2) "Covered Connecticut program" means the program established 265
under subsection (b) of this section; 266
(3) "Exchange" has the same meaning as provided in section 38a-1080; 267
(4) "Health carrier" has the same meaning as provided in section 38a-268
1080; 269
(5) "Individual market" has the same meaning as provided in 42 USC 270
18024(a), as amended from time to time; and 271
[(6) "Office of Health Strategy" means the Office of Health Strategy 272
established under section 19a-754a; and] 273
[(7)] (6) "Silver level" has the same meaning as provided in 42 USC 274
18022(d), as amended from time to time. 275
(b) There is established within the Department of Social Services the 276
Covered Connecticut program for the purpose of reducing the state's 277
uninsured rate. The Commissioner of Social Services shall administer 278
said program in consultation with the [Office of Health Strategy, ] 279
Insurance Commissioner and exchange, and, as part of said program, 280
the Department of Social Services shall: 281
(1) Provide premium and cost-sharing subsidies that are sufficient to 282
ensure fully subsidized premium coverage: 283
(A) On and after July 1, 2021, for parents and needy caretaker 284
relatives, and their tax dependents not older than twenty -six years of 285
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age, who (i) are eligible for premium and cost -sharing subsidies for a 286
qualified health plan, (ii) are ineligible for Medicaid because their 287
income exceeds the Medicaid income limits under chapter 319v, (iii) 288
have household income up to one hundred seventy -five per cent of the 289
federal poverty level, (iv) are receiving coverage under a qualified 290
health plan offered through the exchange in the individual market at a 291
silver level of coverage, and (v) are utilizing the full amount of 292
applicable premium subsidies for such plan; 293
(B) On and after July 1, 2021, for the following additional family 294
members of parents and caretaker relatives receiving coverage under 295
such qualified health plan, provided the requirements of subparagraph 296
(A) of subdivision (1) of this subsection are met: (i) A child over twenty-297
six years of age who is permanently and totally disabled, as defined by 298
the Internal Revenue Service pursuant to 26 USC 152, or (ii) a child who 299
is over the age of twenty -six and is incapable of self -sustaining 300
employment by reason of mental or physical handicap and is chiefly 301
dependent upon the parent or caretaker relative for support and 302
maintenance, as described in sections 38a -489 and 38a -512a, or (iii) a 303
child or stepchild receiving coverage under such qualified health plan 304
as described in sections 38a-497 and 38a-512b; 305
(C) On and after July 1, 2022, for all parents, needy caretaker relatives 306
and low-income adults who (i) are at least nineteen but not more than 307
sixty-four years of age, (ii) are eligible for premium and cost -sharing 308
subsidies for a qualified health plan, (iii) are ineligible for Medicaid 309
because their income exceeds the Medicaid income limits under chapter 310
319v, (iv) have household income up to one hundred seventy -five per 311
cent of the federal poverty level, (v) are receiving coverage under a 312
qualified health plan offered through the exchange in the individual 313
market at a silver level of coverage, and (vi) are utilizing the full amount 314
of applicable premium subsidies for such plan; and 315
(D) On and after July 1, 2022, for the following additional family 316
members of parents, caretaker relatives, and adults receiving coverage 317
under such qualified health plan, provided the requirements of 318
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subparagraph (C) of subdivision (1) of this subsection are met: (i) A 319
child over twenty -six years of age who is permanently and totally 320
disabled, as defined by the Internal Revenue Service pursuant to 26 USC 321
152, or (ii) a child who is over the age of twenty -six and is incapable of 322
self-sustaining employment by reason of mental or physical handicap 323
and is chiefly dependent upon the parent or caretaker relative for 324
support and maintenance, as described in sections 38a-489 and 38a-512a, 325
or (iii) a child or stepchild, as described in sections 38a-497 and 38a-512b. 326
[(2) Not earlier than July 1, 2022, provide dental and nonemergency 327
medical transportation services, as provided under chapter 319v, to all 328
eligible individuals described in subdivision (1) of this subsection;] 329
[(3)] (2) Establish procedures to, on a quarterly basis, pay in 330
reimbursement to each health carrier offering the qualified health plan 331
described in subparagraph (A) or (B) of subdivision (1) of this 332
subsection, as applicable, the premium and cost -sharing subsidies 333
required under subdivision (1) of this subsection to ensure fully 334
subsidized coverage; and 335
[(4)] (3) Consult with the [Office of Health Strategy and ] Insurance 336
Commissioner for the purposes set forth in section 17b-312. 337
(c) On or after January 1, 2027, the Department of Social Services may, 338
as part of the Covered Connecticut program, provide dental and 339
nonemergency medical transportation services, as provided under 340
chapter 319v, to all eligible individuals described in subsection (b) of 341
this section. 342
[(c)] (d) (1) The [Office of Health Strategy ] Department of Social 343
Services may, subject to the approval required under subdivision (3) of 344
this subsection, seek a waiver pursuant to Section 1332 of the Affordable 345
Care Act, as amended from time to time, to advance the purpose of the 346
Covered Connecticut program. The [Office of Health Strategy ] 347
department shall implement such waiver if the federal government 348
issues such waiver. 349
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(2) The [Office of Health Strategy] Department of Social Services shall 350
submit a report, in accordance with section 11 -4a, to the joint standing 351
committees of the General Assembly having cognizance of matters 352
relating to appropriations, human services and insurance containing 353
any proposed waiver described in subdivision (1) of this subsection 354
before seeking such waiver from the federal government. 355
(3) Not later than thirty days after the [Office of Health Strategy ] 356
Department of Social Services submits a report under subdivision (2) of 357
this subsection, the joint standing committees of the General Assembly 358
having cognizance of matters relating to appropriations, human 359
services and insurance shall convene a joint public hearing on the 360
proposed waiver contained in the report , [submitted pursuant to 361
subdivision (2) of this subsection, ] separately vote to approve or reject 362
such proposed waiver and advise the [Office of Health Strategy ] 363
department of their approval or rejection of such proposed waiver. If 364
any committee takes no action on such proposed waiver within the 365
thirty-day period, the proposed waiver shall be deemed rejected. 366
[(d)] (e) The benefits and subsidies provided for individuals as part 367
of the Covered Connecticut program shall not be considered income for 368
such individuals for the purposes of chapter 229. 369
[(e) Not later than January 1, 2022, every six months thereafter 370
through January 1, 2024, and annually after January 1, 2024, the] (f) The 371
Commissioner of Social Services shall annually submit a report, in 372
accordance with section 11 -4a, to the joint standing committees of the 373
General Assembly having cognizance of matters relating to 374
appropriations, human services and insurance. Such report shall contain 375
a description of the operations and finances of, and progress made by, 376
the Covered Connecticut program for the immediately preceding 377
reporting period. 378
[(f) Notwithstanding any provision of this section ] (g) On or before 379
January 1, 2028, subject to federal approval , the Covered Connecticut 380
program shall only include in -network health care providers and in -381
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network services, unless the health carrier's network is deemed by the 382
Insurance Commissioner to be inadequate. Benefits described in 383
subsection (b) of this section and cost -sharing available to all eligible 384
individuals pursuant to subdivision (1) of subsection (b) of this section 385
shall only apply if such eligible individuals use in -network health care 386
providers or in-network facilities. 387
(h) (1) Notwithstanding any provision of this section, the 388
Commissioner of Social Services may make program design changes as 389
necessary to meet requirements for approval, renewal or continuation 390
of the federal waiver approved under Section 1115 of the Social Security 391
Act pursuant to which the Covered Connecticut program is 392
administered. 393
(2) The Commissioner of Social Services may, in consultation with the 394
Office of Policy and Management, prior to the expiration of such federal 395
waiver, explore, develop or pursue approval of alternative program 396
designs, including, but not limited to, a basic health plan that enables 397
coverage for applicants with household incomes of up to two hundred 398
per cent of the federal poverty level pursuant to Section 1331 of the 399
Affordable Care Act, as amended from time to time. 400
This act shall take effect as follows and shall amend the following
sections:
Section 1 from passage New section
Sec. 2 January 1, 2027 New section
Sec. 3 January 1, 2027 New section
Sec. 4 from passage and
applicable to income and
taxable years commencing
on or after January 1, 2026
New section
Sec. 5 October 1, 2026 New section
Sec. 6 from passage 19a-754c
HS Joint Favorable Subst. -LCO
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FIN Joint Favorable