The state is eliminating competition and shortchanging residents. When will it stop?

Maine has high health insurance rates. In 2004, a family of four with parents age 40, living in Louisville, Ky., could buy a $1,000-deductible policy for $400 per month. In Waterville, a similar policy would cost them $1,395 per month.

Kentucky is one of more than 40 states with rates a fraction of Maine’s. In the 1990s, Maine passed numerous regulations including guaranteed issue for individuals and community rating. While eight states enacted guarantee issue for individuals, three have since repealed it. Only a few states have community rating; only five have strict community rating like Maine. Community rating and guaranteed issue destroy competition among health insurers. After the regulations passed in Maine, 11 health insurers left our market. While some government regulation is necessary to protect the consumer, government regulation does not lower price. Competition lowers price.

According to a study by William Congdon of Princeton University, Anna Kowalski of Massachusetts Institute of Technology and Mark Showalter of Brigham Young University, guaranteed issue raises rates by 94 percent, and community rating raises rates by 27 percent for the average family. They also noted that deductibles and co-pays on health insurance products were lower in states without those regulations. In other words, the coverage is better.

Insurance is a contract whereby the insurer accepts the risk of a bad event happening. Auto insurance insures against the risk of an accident or car being stolen. The price you pay to get the insurance company to assume the risk is the premium. Premiums are set by looking at the risk. Risk involves looking at the probability of a claim. The risk is not the same for everyone. Young men pay more for auto insurance because they are more likely to have an accident. Women pay less for life insurance because they live longer.

In Maine, for every insurance product except health insurance, the premiums are set by looking at the risk. In most states, health insurance premiums are set by looking at the risk. Community rating says the insurer cannot take risk into account when setting premiums. When you force insurers to take risk with no questions asked, rates go up. More young, healthy people become uninsured and insurance goes into a death spiral. The highly respected American Academy of Actuaries calls allowing insurers to classify and select risks a consumer protection, which stabilizes insurance rates. Maine prohibits insurers from engaging in this consumer protection.

In 2004, a 20-year-old in Fargo, N.D., could buy a $1,000-deductible policy for $119 per month. In Waterville, he would pay $421 per month for a similar policy. The North Dakota rate reflects the risk.

Some say community rating protects the elderly. The trouble with that argument is the elderly pay less in states without community rating. In Fargo, a 60-year-old man can get a $1,000-deductible policy for $412 per month. In Waterville, he would pay $631 per month for a similar policy. After age 65, people go on Medicare.

Some say that repealing guaranteed issue will allow insurers to dump people when they get sick. Almost every state in the country has a law called guaranteed renewability, which says if you become sick, your insurance carrier must continue to renew your policy and cannot change your premiums based on the illness. Guaranteed issue and guaranteed renewal are different laws.

Guaranteed issue is a way of guaranteeing access to health insurance for people who are sick at the time they apply for insurance. Another way is a high-risk pool. Recently, the Ohio Department of Insurance recommended that Ohio enact a high-risk pool. If Ohio does, it will join 33 other states. A very small number of people are so sick at the time they apply for insurance that if their rate were based on risk, it would be astronomical. Most states create a subsidized product for those people, called a high-risk pool. Congress, with bipartisan support, is even offering states money to create high risk pools. Critics say that high-risk pools charge high rates. Most high-risk pools actually charge lower rates than Maine. A 40-year-old female who ends up in the Kentucky high risk pool would pay $361 per month for a $1,000-deductible policy. She would pay $526 per month for a similar policy in Waterville. A perfectly healthy 40-year-old in Waterville would also pay $526 per month. In other words, the 40-year-old female who lives in Kentucky who has cancer at the time she applies for health insurance pays less than the 40-year-old in Waterville who is capable of climbing mountains.

To deal with the crises these laws created, Maine expanded its Medicaid program. In 1987, Maine’s uninsured rate was 8.5 percent, with only 9.9 percent of Mainers on Medicaid. In 2003, Maine’s uninsured rate was 10.3 percent with 18 percent of Mainers on Medicaid. Medicaid now eats up an ever larger portion of our state’s budget. Funding for universities, education and parks suffer. In 2003, Maine spent 8.7 percent of its budget on higher education, while the national average for states was 12.1 percent on higher education. Maine is cutting the quality of Medicaid benefits for the truly needy so we can afford more people on Medicaid.

In 1993, Maine had no real data on community rating and guaranteed issue for individuals. Today, we know these laws do not work. How long will it take Maine to admit a mistake was made?

Daniel J. Bernier is an attorney in Waterville.