Maine plans revamp of health reform law

AUGUSTA, Maine--Maine, which four years ago pioneered the legislative drive to reduce the number of people without health insurance, is going back to the drawing board.

Last week, Gov. John Baldacci, who drove the 2003 reform effort, said it is time to update the law, which has had only a small impact in reducing the number of uninsured.

"Now is the time to take the next step. We will make sure quality health care is available for everyone," Gov. Baldacci said.

Building on the 2003 law, the governor's new package--details of which have yet to be finalized and which borrow heavily from Massachusetts' 2006 universal health care law--would impose assessments on employers that do not offer health insurance.

Additionally, Maine residents with annual incomes of at least 400% of the federal poverty level--which, for example, for a family of four, would be about $80,000--would have to have health insurance or face financial penalties. That is less far-reaching than Massachusetts' individual mandate that applies to all residents unless they prove that affordable coverage is not available.

Under Gov. Baldacci's proposal, DirigoChoice, a state-subsidized health insurance plan offered through Anthem Blue Cross & Blue Shield that is available to small employers and individuals, would be made more affordable to small businesses. The proposal doesn't specify, though, how Dirigo, which is now structured so that the state pays part of lower-income employees' premiums, would be made more affordable.

The plan also would impose a surcharge on hospital bills to help fund uninsured coverage. The surcharge would be set at a level to raise revenue "equal to the amount of health care provided to previously underinsured and uninsured enrollees in DirigoChoice." The plan does not explain how the "amount of health care" provided would be measured.

Finally, the proposal would allow the state to reinsure health insurers for big claims they incur in the personal lines market. The cost of the reinsurance would be paid by imposing a 2% premium tax on health maintenance organizations.

While Maine's program was hailed in 2003 as moving the state towards universal coverage, many agree that its accomplishments have been modest.

Today, roughly 10% percent of state residents are without health insurance, about the same as before the law's enactment four years ago. Some say the number of uninsured would be even higher had Maine not expanded eligibility for Medicaid, the state-federal program that provides coverage for the indigent.

At the same time, initial predictions that tens of thousands of state residents would find coverage with Dirigo have not come close to being realized. Current Dirigo enrollment is a little more than 13,000, about 1% of the state's population.

"By any measure, while laudable in intent, Dirigo really has failed to meet expectations," said Randy Abbott, a senior consultant at Watson Wyatt Worldwide in Wellesley Hills, Mass.

State business groups and health care scholars say there are many reasons why Dirigo hasn't attracted many employers, but the most significant is cost.

"We thought it would be cheaper, but in fact, it is as expensive as many other products," said Dave Spellman, president of Pratt Financial Group, an insurance agency in Westbrook, Maine.

Another negative has been Dirigo's structure, in which the portion of the premium paid by the state decreases as employee income rises, while the deductibles imposed increase along with income.

Since the current law requires employers participating in Dirigo to pay the same percentage of the premium for all employees, higher-income employees, whose premiums are not state subsidized, likely would pay more in premiums for a less generous plan compared to a non-Dirigo plan.

"While this may make sense on paper and be equitable, in practice it is a different situation," said Tarren Bragdon, director of health reform initiatives for the Maine Heritage Policy Center in Portland. Higher-income small-business owners may lack the financial incentive to buy the coverage, especially if they also have a fair number of higher-income employees, Mr. Bragdon said.

While awaiting more details, some state business groups are staunchly opposed to Gov. Baldacci's plan to impose a fee on those employers that do not offer health insurance coverage.

"It is outrageous. What they are saying is, if you can't afford to offer what is very expensive health insurance coverage, 'we will make you pay a penalty.' What we want to see is health insurance made more affordable," said David Clough, state director of the Maine National Federation of Independent Business in South Freeport.

State observers attribute Maine's high cost of health insurance to a paucity of insurers because of overly restrictive rules and low Medicaid reimbursement rates, which results in health care providers charging more for patients in employer-sponsored plans.

"Maine has had a very heavy-handed approach when it comes to the regulation of health insurance, which has driven up costs," said Grace-Marie Turner, president of the Galen Institute, a health policy research organization in Alexandria, Va.

Ms. Turner said the key to expanding coverage is to make health insurance more affordable and provide subsidies for lower-income individuals.