Stephen Wood: For Maine health insurance, the experiments are over

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Public Law 90 is a series of well-tested reforms.

During the past several decades, Maine has been a virtual laboratory for health insurance experiments. New ideas that were only talked about in the rest of the country were put into practice in Maine — with our citizens as the guinea pigs. These experiments invariably failed, leaving Mainers paying more of their income for health insurance than anyone else in the country.

Probably the most dangerous of these experiments were the combined mandates of guaranteed issue and community rating. Put simply, young healthy people with low risk were forced to pay almost the same amount as high-risk, older, less healthy people. The result was adverse selection; younger, healthier people dropped out of the insurance pool, leaving the older and less healthy people in it. Premiums for everyone soared.

Other mandates included coverage for treatments that many people simply didn’t want to pay for — drug and alcohol rehabilitation, mental health care, chiropractic and others. The idea of a catastrophic policy was gone. In Maine, you either bought the “Cadillac policy” or none at all.

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The mother of all health insurance experiments was Dirigo Health. This “public/private partnership” took an unprecedented step toward more government involvement in health insurance. It failed to come close to any of its goals, ate up hundreds of millions in tax dollars and continued to delay real health insurance reform. Premiums continued to rise at ever-faster rates.

Maine’s medical welfare program, MaineCare, has also had an adverse effect on health insurance rates.

MaineCare has expanded dramatically in the past decade, rising by more than 78 percent to 361,000 enrollees. As a percentage of our population, that is 35 percent higher than the national average.

Not only has this expansion of free medical care required an ever-growing amount of state tax dollars, it also has put a strain on health care providers. MaineCare never pays the full cost of care. That unmet cost must be made up by — you guessed it — higher health insurance premiums for the rest of us.

And there were more experiments, including a “health care bill of rights,” which simply put more unnecessary and burdensome regulations on insurers, more coverage mandates and a new tax on health insurance claims to pay for Dirigo.

Premiums skyrocketed and insurance companies closed up shop and left the state, all but eliminating market competition.

According to the Maine Bureau of Insurance website, Maine’s average yearly rate of increase in the small group market over the past 10 years has been around 19 percent. In the individual market, the average increase has been 13 percent. Clearly, these experiments have failed.

But, finally, we might see some relief.

Last session, a true health insurance reform law, LD 1333, was passed by the Maine Legislature. The new law, now Public Law 90, is a series of well-tested reforms.

Among other things, it changes community rating rules, allowing young people to benefit from their low risk. It provides a reinsurance pool so the least healthy can get coverage at reasonable rates. Moreover, it permits more businesses to band together and self-insure and allows out-of-state purchase of insurance for individuals by 2014.

The new law does all of this while following the new Affordable Care Act (“Obamacare”) guidelines.

And here’s more good news: According to a recent study by Gorman Actuarial, commissioned by the Bureau of Insurance, the reinsurance pool for the individual market in PL 90 will reduce premiums by 12 to 15 percent, on average. They also project that younger, healthier people entering the individual market should reduce rates by an additional 3 to 5 percent, on average.

In the first year, the study estimates that in the small group market, 84 percent of the members and 73.8 percent of the groups will pay less as a result of broadening the community rating bands under PL 90. In the second year, they project that 93.6 percent of the members and 82.5 percent of the groups in the small-group market will pay less.

These predictions of lower rates for most of the health insurance market in Maine are a first. After years of ill-advised experiments that only produced higher rates, Maine will be using simple, common-sense market-reform strategies that have been successful for years in many other states.

These reforms will take several years to be fully implemented, and not everyone will see immediate benefits. Overall, however, the prognosis is good.

State Rep. Stephen Wood,

R-Sabattus, a first-term legislator, serves on the Inland Fisheries and Wildlife Committee.

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