Hartford Business Journal

20 Hartford Business Journal • December 18, 2017 • www.HartfordBusiness.com OTHER VOICES Municipal broadband effort too risky for ratepayers By Marc Brown W hen we last visited the issue of municipal broadband, the Westerly, Rhode Island town council was weighing a proposal from SiFi Networks to build a $30 million fiber-optic network. The system was to be taxpayer funded through annual payments ranging from $1 million to $2.5 million over 30 years. SiFi "guaranteed" the network would gen- erate enough revenue for the town to fully cover that cost, but the guarantee was backed only by their good word. Westerly wisely rejected that plan as too risky to the town and its taxpayers, as have a number of other municipalities where SiFi has over- hyped the promise of municipal broadband. Now SiFi is back, contracting with the town of East Hartford to build a high-speed fiber optic network "at no cost to the town," according to the director of finance. But it seems that "no cost" may actually just mean "no cost we are disclosing at this point in time." Looking behind the curtain at the development agreement and the smart city managed services agreement, both recently approved by the East Hartford town council, there are a number of red flags. The town appears to be responsible for hundreds of thousands of dollars in upfront costs, including: a $40,000 fee upon "sub- stantial completion" of the network; at least $257,000 in fees to connect the town's initial list of "demand points"; potentially hundreds of thousands of dollars of added costs to connect additional town "demand points"; any costs required to adapt town facilities to the system; and $20 per month per "demand point" charges, which could mean hundreds of thousands of dollars per year. Hardly a "no-cost" proposition, and these are just the costs we are aware of at this stage. Why are these costs no surprise? Because the promises of "no cost" municipal broadband prove to be smoke and mirrors. Inevitably, these agreements either have hidden costs or result in zombie devel- opments that never actually commence construction. SiFi is typical in this regard. The company has no record of delivering on its promises of building "no-cost" municipal fiber net- works. Besides the failed effort in Westerly, municipalities such as Pacific Grove, Calif. walked away from potential agreements with SiFi. The company did manage to enter into agreements in 2014 with Fullerton, Calif., and Louisville, Ky., for "FiberCity" proj- ects similar to the East Hartford proposal. However, three years later neither project has begun construction, according to SiFi's website. Ask yourself: If these networks can be de- veloped at no cost to municipalities, why are we not seeing them roll out on a regular ba- sis? Why have so many communities, such as Provo, Utah, and Groton, Conn., been forced to fire-sale failed municipal broadband proj- ects, leaving taxpayers stuck with millions in debt? In fact, if fiber-based broadband deployments are such a home run that can be financed privately, why is Google Fiber rolling back expansion plans and limiting the service offerings in existing locations? Reliable, robust internet service is important in today's economy. It's also widely available across Connecticut, with 99 percent of the population having access to 25 mbps or greater service, and Gig service beginning to roll out. If local or state governments wish to address the small slice of truly unserved populations, they should engage the private sector to extend service to those specific areas but leave the ownership and ongoing network operation with private providers. East Hartford taxpayers have much to risk and little to gain from SiFi. Internet service providers in town can already provide residents and businesses speeds of 100mbps or more. Broadband providers have spent hundreds of millions of dollars to lay thousands of network miles through- out the state and they continue to improve those networks year after year. Most importantly, though, they do this in a manner that ensures long-term viability, and ensures taxpayers and ratepayers do not foot the bill if the systems are no longer sustainable. There is no such thing as a free lunch and municipal broadband is no exception. The citizens of East Hartford should look behind the curtain and the town council should think twice and reverse its decision to go down this road. Marc Brown is the president of the New England Ratepayers Association. OTHER VOICES Congress must preserve CT employers' right to self-insure By Brooks Goodison C onnecticut health insurers recently announced their 2018 premiums. Employers won't like them. Rates for some small business plans will rise more than 25 percent. That follows an average increase of 5 percent last year. Many Connecticut firms are under- standably looking for ways to avoid these premium hikes. Some are opting to "self- insure," or pay their workers' health claims directly instead of turning to traditional insurers for coverage. Unfortunately, officials in some states want to effectively ban self-insurance. The U.S. House of Representatives has passed legislation that would counteract those ef- forts. But it's stalled in the Senate. The upper chamber must stall no longer. Scores of Connecticut busi- nesses, nonprofits, and municipalities — not to mention their workers — are counting on Con- gress to safeguard their self-insured health benefits. When employers buy health plans from traditional insurers, they typically pay far more than their employees' care actually costs. Their premiums cover insurers' over- head, administrative costs and profits. Insurers also have to protect themselves against a potential worst-case scenario, where multiple employees face huge medi- cal bills. That pushes premiums even higher. But if an employer has a good year, with low medical costs, his insurer doesn't send him a rebate. That insurer keeps the excess, perhaps to cover another employer in its risk pool that wasn't so lucky. Self-insured organizations, by contrast, pay only for the care their employees con- sume. According to one study, employers can cut their health expenses by about 10 percent over the first five years following a switch to self-insurance. Consider the Region 15 public school system, which serves Middlebury and Southbury. In the first year after switch- ing to self-insurance, the district reported savings of $1 million. Because they pay their employees' medical claims directly, self-insured organizations have an incentive to keep their workforces healthy. If a worker quits smoking, for instance, the firm's potential health costs drop significantly. So self-insured employers often offer top-of-the-line benefits. They may subsi- dize smoking-cessation programs or spon- sor on-site clinics, where workers can get routine check-ups free of charge, in hopes that they'll catch health problems before they grow serious or costly. Because they can sometimes provide better benefits at lower cost, self-funded health plans are popular. More than 57 percent of all private-sector employees in Connecticut are enrolled in such plans. Of course, self-insurance is not without risk. If multiple employees experience ac- cidents or are diagnosed with chronic con- ditions, the total medical bill could deliver a serious blow to a firm's finances. To protect themselves, self-insured firms buy "stop-loss" insurance, which reimburses them for medical expenses beyond a pre-determined cap. Some states are considering regulating stop-loss policies out of existence by defin- ing them as health insurance. That would require them to cover routine health- care expenses and pay out more than 80 percent of premium revenue in claims, as federal law requires. These proposed rules ignore the fact that, unlike traditional health insurance, stop loss doesn't pay healthcare providers. It reimburses employers. Further, like most other forms of insur- ance, employers purchase stop loss hoping that they won't have to use it. If they don't make a claim, then they've likely held their overall health costs in check. Mandating that stop-loss policies pay out a minimum percentage of premium revenue in claims defeats their purpose. States are launching this attack on stop loss because they want to force self- insured firms back into the traditional insurance market. They blame these em- ployers for the market's rising premiums. Because self-funded firms aren't paying into the traditional insurance pool, only those with high health costs, for whom self-insurance isn't a good deal, remain. And that means higher premiums. It's hardly fair to take away self-insured employers' existing coverage — and require them to pay more for less gener- ous traditional health insurance — by effectively banning stop loss. That's why Congress has to act. The House has sent the Senate legislation that would prevent state officials from redefining stop loss as health insurance — and thus protect the ability of employers to self-insure. This Self-Insurance Protection Act passed the House by a bipartisan majority of 384 votes. Now, it's time for the Senate to enshrine SIPA into law and ensure that employers in Connecticut and across the country can continue to self-insure for years to come. Brooks Goodison is president of Marlborough, Conn.-based Diversified Group, a self-insured employer and health benefits firm. Marc Brown Brooks Goodison Opinion & Commentary

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