A marketplace approach is a preferable approach to a universal health care system.

In 1993, Maine instituted guaranteed issuance and modified community rating in its individual policy marketplace. While these regulations had good intentions, it has not worked in Maine, as most (all but one) individual medical carriers have left our marketplace.

These results are similar to the experiences other states have had with the same type of regulation in the IM marketplace.

Guarantee issue and modified community rating have proven to result in: higher premium rates, fewer companies in the marketplace, and even the companies that stayed limited their product offerings in the marketplace.

As a result, Maine consumers are left with few health care choices, very high premiums and large out of pocket expenses. This has led to a severe underinsured problem in Maine, as many consumers are forced to carry a much higher deductible than they would normally choose.

In Maine, L.D. 1190 and L.D. 161 (with slight amendments) are needed collectively to ensure our residents are able to obtain individual medical health insurance at reasonable rates and appropriate benefit levels.

As an example, Kentucky repealed guaranteed issue along with instituting a high risk pool. One month after the change in Kentucky, the state’s largest (and only) insurance carrier at the time immediately dropped its new business rates from 40 to 70 percent, along with increasing product offerings in the state.

Currently, the rate in Portland for a 47-year-old is almost two times higher than the rate for a similar individual living in Manchester, N.H. To put that into perspective, the actuarial cost difference between the two cities is only 10 percent.

What do you think drives the additional 90 percent in cost? Guaranteed issue, community rating and the lack of a risk pool.

Similarly, the rate for a 25-year-old living in Portland can be up to three times the rate of the same individual living in Manchester, N.H. Why is this so much higher? It is the result of the narrow allowance for rate differentiation by age that is mandated in Maine. The effect of this mandate results in fewer young healthy individuals entering the insurance pool, which drives up the overall premium rate for the whole pool.

What about the individuals who are unhealthy, with significant health conditions? Many of these individuals fall out of the group marketplace, as many are too sick to work.

Under current Maine legislation, the individual marketplace must bear the cost for these individuals, which is too small of a base to appropriately spread the risk of these high cost individuals. A risk pool allows for broad spreading of risk, which is a more equitable solution.

What is the effect on premium rates for this unhealthy segment?

These individuals, in many cases, will actually pay less than they do today, as high risk pool rates are usually set at a multiple of the market premium rate. As shown, market rates are expected to drop from 40 to 70 percent, while high risk pool rates are normally set at a multiple of 25 to 50 percent of the new business rate.

A marketplace approach is a preferable approach to a universal health care system. Many consumers have different needs and wants in regard to health care and a marketplace approach allows for consumer choice in health care. Some individuals want coverage that allows for first dollar benefits; some consumers want catastrophic coverage only.

Government mandated health coverage will lead to increased cost, limited, if any, consumer choice, less access to providers and less consumer satisfaction, like we have now – only worse.

Rep. Michael Vaughan of Durham serves on the Insurance and Financial Services Committee.