AUGUSTA – When state officials proposed the creation of the Dirigo Health program, they predicted that it would enroll 31,000 people by the end of the first year.
Now, more than 16 months after the program was rolled out, fewer than 10,000 people are enrolled. And the program has a long way to go toward its stated goal of providing health coverage to the 130,000 Mainers who lack insurance; it is now providing coverage to about 5,000 people who previously weren’t insured.
One big reason for the shortfall is that Dirigo Health’s insurance program, known as DirigoChoice, is not attracting as many businesses as expected.
DirigoChoice is most appealing to individuals who receive rebates on their coverage based on income, and to those who otherwise can’t get insurance because of pre-existing conditions or a lapse in coverage. But for business owners,
DirigoChoice offers little if any cost savings, has limited choices and is inflexible.
With fewer businesses, most DirigoChoice members are individuals and sole proprietors. Four out of five enrollees receive subsidies from the program.
As a result, the subsidies that the program pays to low-income Mainers to make the insurance affordable are higher than expected. The higher subsidies make the program more expensive – making it difficult to reduce premiums to lure more businesses.
Mark Baldwin, owner of The Borealis Press greeting card company in Surry, spends about $35,000 a year on an Aetna HMO plan for his 14 employees.
Providing health insurance helps Baldwin retain employees and makes for a healthy work force. He likes the overall idea of Dirigo and its goal of providing insurance for the uninsured and an affordable alternative for small businesses.
But when Baldwin looked into buying DirigoChoice insurance, it simply didn’t fit into his business plans.
“The Dirigo policy wasn’t as good for our employees,” he said. “I’m just looking for something comparable and they didn’t have it.”
State officials agree that business enrollments are disappointing so far. But they say they’re working on ways to make DirigoChoice more affordable so more businesses will buy into it and expand the program.
“We aren’t backing down from our commitment to get to universal coverage,” said Trish Riley, director of the Governor’s Office of Health Policy and Finance. “It’s just a little unclear on how long it’s going to take.”
Championed by Gov. John Baldacci, the Dirigo Health Reform Act was signed into law in June 2003 as a way to improve Maine’s health care system by insuring the uninsured, controlling health care costs and improving the quality of health care.
The part of the program that has drawn the most attention is DirigoChoice, which is touted as a path toward universal health coverage.
DirigoChoice also has been promoted as a way for small businesses, those with 50 or fewer employees, to reduce their health care costs.
For now, the program will continue as is following the failure of Democratic efforts to restructure the program last week in the Maine Legislature.
Lawmakers rejected a proposal to allow the program to be self-insured instead of contracting with Anthem Blue Cross and Blue Shield.
A second bill, to revise the program’s funding mechanism, was also killed shortly before the Legislature adjourned.
Baldacci, who supported both bills, is appointing a 15-member commission to study the structure and financing of the program. The panel is due to report back by early January.
Outside of the political arena, though, lies the bigger question: What does DirigoChoice have to offer small businesses? Does it stack up with competing plans already offered by Anthem, Aetna and Harvard Pilgrim, which also sell health insurance to small businesses?
The Associated Press asked three insurance agencies – Cross Employee Benefits in Augusta, Allen Financial Group in Camden, and F.A. Peabody Co. in Houlton – to compare DirigoChoice to plans offered by insurance companies.
It’s not possible to give an apples-to-apples comparison of different plans. They vary in what they have offer, from their deductibles and out-of-pocket expenses to co-payments for office or hospital visits and pharmacy benefits.
But a side-by-side comparison does show how limited DirigoChoice’s offerings are compared to the dozens of other insurance plans available from other insurance providers.
And while DirigoChoice is appealing to low-income people who receive subsidies – up to 100 percent – and people who are sick and can’t otherwise get insurance, many business owners and insurance agents say DirigoChoice doesn’t offer the cost savings to justify switching.
Insurance agents and business owners interviewed by The AP said they support the concept of DirigoChoice and efforts to insure the uninsured and to rein in spiraling health care costs. But when businesses examine their health insurance options, DirigoChoice is simply one more choice – with little to distinguish it from the others.
Mike Deschaine, president of Cross Employee Benefits, said Dirigo is most appealing to people who qualify for subsidies from the state. But businesses are shying away from it, he said, because it doesn’t offer significant cost-savings and is complicated.
Some businesses are reluctant to sign up because of the program’s uncertain future.
Max Lynds, a vice president at F.A. Peabody Co. in Houlton, said most of the Dirigo plans sold by his agency have been to individuals. He agreed that it has been a hard sell to businesses because of the lack of cost savings.
For instance, he can sell an Anthem product with a $1,000 deductible and a $4,000 out-of-pocket maximum with similar coverage as Dirigo for $466 a month per person. The Dirigo plan, with a higher deductible and the same out-of-pocket, would cost $483 a month.
“The bottom line is I can sell you a very similar product with a lower deductible for less money,” he said. “So unless you’re able to partake in a discount, I’m going to have a difficult time selling you on the plan.”
In Augusta, Occupational Health Associates of Maine decided to stick with Aetna when it came time to renew insurance this year for its 18 employees, said director Ruth Lawson-Stopps.
For starters, the Aetna plan was cheaper and just as comprehensive. Furthermore, she said, DirigoChoice wasn’t structured well for her company and required additional paperwork.
The company now pays 50 percent of its employees’ health care premiums, Lawson-Stopps said. DirigoChoice would have required it to pay at least 60 percent of the premiums.
“I can’t afford to be paying more than 50 percent,” she said.
In Waldoboro, the Science Source opted against DirigoChoice when renewing insurance for the company, which makes laboratory equipment for schools.
Small business owners are busy and don’t have time to figure out the intricacies of the plan and which benefits it may bring the employees and the company, which spends about $130,000 a year to cover 23 of his employees, said President Rudy Graf.
Besides, he added, it didn’t offer any savings.
“I have a social conscience so if it came out close, I would have been tempted to go with Dirigo,” he said. “If it had resulted in a 10 percent savings rather than a 20 percent increase, it would be a no-brainer.”
Even with smaller-than-expected numbers, DirigoChoice is still the fastest-growing health insurance product ever launched in Maine.
The initial projections, which seem rosy with the benefit of hindsight, were made before the Legislature amended the original Dirigo Health proposal, Riley said. She also underestimated how hard it would be to sell the product.
At the same time, the program’s subsidy payouts are higher than had been anticipated. Seventy-nine percent of those enrolled receive subsidies, and a large number – 46 percent – are getting 80-percent discounts on their coverage when the state was expecting to see more 20- or 40-percent discounts, Riley said.
All of which puts the program into a quandary when it comes to courting businesses.
On the one hand, DirigoChoice needs to drive down costs to bring in more businesses. Then again, it needs to bring in more businesses to drive down costs.
And to get insurance into the hands of the uninsured, the Dirigo plan needs more businesses to participate.
“The way to get to the uninsured is through the small businesses because that’s where the people are,” Riley said.
Still, there are thousands of people who have enrolled in DirigoChoice.
Of the 9,790 people enrolled at the end of April, 29 percent were sole proprietors, 34 percent were individuals and 37 percent came from small businesses with two to 50 employees.
Jake Barbour signed up his excavation and construction company a year ago. The company, based in Owl’s Head, has about 18 year-round employees.
Barbour didn’t offer his employees health insurance in the past, and about a dozen are now enrolled. He didn’t consider any other plans because he figured he wouldn’t get enough employees signed up unless they could get discounts.
Dirigo benefits his company because it attracts and retains employees, Barbour said. And it benefits his employees because they are now covered.
“It’s good business,” he said. “And it’s good for them.”
Likewise, Nik DeMaria of Warren has been enrolled in Dirigo for nearly a year.
DeMaria, 42, began running his own computer services firm full time last year. But with four children and a wife to insure, he wouldn’t have been able to do it without Dirigo, he said.
Other insurance policies for his family would have cost $1,200 to $1,500 a month – which is nearly a third of how much he makes at his new business.
Based on his income and family size, DirigoChoice subsidizes 60 percent of his health insurance premiums, bringing his costs to under $400 a month.
“When DirigoChoice came along, it enabled me to create my business,” said DeMaria. “My long-term plan is that as I get more successful and grow, my reliance on the subsidy will decrease because my business will be able to pick it up.”
On the Net:
Dirigo Health: www.dirigohealth.maine.gov/