AUGUSTA – The Maine House of Representatives passed a bill Tuesday that would stabilize funding for the State’s Dirigo Health program, reduce private insurance rates for Maine customers by up to 40 percent and bring more healthy young people into the health care market. The House approved the bill, sponsored by House Majority Leader Hannah Pingree and drafted in cooperation with the governor’s office, by a vote of 76-68.

“This is good news for the thousands of Maine people and businesses that rely on Dirigo for quality affordable health care, and for the tens of thousands of Maine people in the private market who will see their rates go down,” said Pingree, D-North Haven. “Maine is a national leader in health care initiatives that protect consumers and ensure quality coverage, and this bill will keep our state moving forward.”

Many of the bill’s market reforms intend to make insurance more attractive and affordable for young and healthy people, who typically have low health care expenses.  Pingree said that Maine needs more young people purchasing insurance in order to lower the cost for everyone. 44% of the uninsured in Maine are age 29 or younger, and the bill would adjust state insurance laws to lower their rates and encourage them to buy policies.

The bill allows for a pilot insurance program for young people in order to establish the good habit of having coverage from a young age at a low cost, and it would adjust the community rating bands – which is the difference that insurance companies can charge between high-risk and low-risk customers - to lower costs for the young and most healthy without raising costs for the older and sick.

The bill also includes a reinsurance program through which Dirigo will pay for major claims, to keep those costs from being shifted to the rest of the insurance market without forcing older people into overly expensive high risk pools that offer poor coverage.

These changes will be heavily monitored by the Bureau of Insurance to ensure that no demographic suffers adverse effects, and also to ensure that annual reimbursements are reflected.

The final individual market reform allows carriers in the individual market to close their book of business and establish a separate community rate for those individuals applying for coverage under an individual health plan on or after July 1, 2009.  Insurers would be required to merge with their old books in 3 years, and provide protections for customers in the “old book” so their rates don’t increase as the market adjusts.

“These market reforms will contribute to lower private insurance rates for Maine consumers by up to 40 percent, especially by drawing in young people, who are largely uninsured,” Pingree said. “And they will encourage more competition in the health care market – which results in even lower rates for everyone.”

The bill would also adjust the funding method for the Dirigo Health Program, which works to contain the out-of-control costs of health care by ensuring transparency in spending, establishing health care best practices and reducing the number of uninsured through the public-private DirigoChoice health insurance product.

Dirigo has provided insurance for more than 28,000 individuals who were either uninsured or underinsured since its inception three years ago. The program has saved the Maine health care system more than $100 million in that time, and until enrollment was capped due to lack of funding, it was the fastest growing insurance product in the State. As of January 2008, 703 businesses were enrolled in the program.

“We’ve all received numerous communications from members of Dirigo about how it has made a huge difference in their lives,” said House Insurance and Financial Services Committee chairman John Brautigam, D-Falmouth, who said that many enrollees believe the program has saved their lives. “500 Mainers died in the last 6 years as a result of not having insurance. We must continue this effort; for those people, and for the rest of the market.”

Brautigam said that if Dirigo’s customers who would otherwise not have coverage lose the program, it would have a negative impact on all insurance customers because the cost of their care would be pushed onto the private market. “Their costs increase, their medical condition worsens, they show up at emergency rooms and get the most expensive kind of health care, and cost gets shifted through a hidden tax to everyone else in the insurance market,” he said.

Program supporters say that Dirigo has contributed to Maine being the only state in the nation to see its rate of uninsured drop over a 5 year period ending in 2006.

“Maine ranks in the top five in both access and quality in the nation” among all states, said Insurance Committee member Jill Conover, D-Oakland. “Dirigo Choice has been an important element in that formula for success.”

Currently Dirigo is funded through a contentious Savings Offset Payment, which is a charge to insurance companies offering products in Maine based on the amount of savings that the Dirigo program has been estimated to generate for their industry. In 2007, Anthem generated $75 million in profits from Maine insurance customers. The bill would replace the Savings Offset Payment with a regular 1.8 percent surcharge on paid claims. Pingree said that the surcharge, which is more acceptable to the insurance community, would be lower than the average SOP payments since the program went into law and would also be more reliable because they are based on claims, and not on a number recalculated regularly by the Bureau of Insurance.

The original proposal would have increased the tax on cigarettes by 50 cents per-pack in order to supplement funds for the program, as cigarettes and tobacco are responsible for hundreds of millions in health care costs to the State. Although many lawmakers agreed with the concept of using money from unhealthy products to pay for health care, many expressed concern that only smokers were bearing the burden and pushed to spread the costs to other health care cost-drivers.

The House stripped the cigarette tax hike proposal on Tuesday, and replaced it with moderate tax increases on beer, wine and soda at the distributor level; an equalization of taxes on some tobacco products that were not taxed at the same rate as cigarettes; and surplus funds from the Fund for a Healthy Maine, which uses settlement money from tobacco companies to pay for state health care initiatives.  

Rep. Herb Clark, D-Millinocket, said that Dirigo has provided a critical alternative for the ever-growing list of people and businesses who cannot afford private insurance. A mill worker, Clark said that he has witnessed a change in retiree benefits that cut out insurance for retired mill employees, most of whom are elderly. “900 employees who were retired lost their medical insurance. From this point on, all of those workers who retire won’t have insurance,” he said.

“I’m not going home and telling the people I represent that I’m going to cut their legs out again, when they were already cut out years ago,” by the paper mills who cannot afford private insurance for retired employees, Clark said. He urged House members to support the bill, saying it is often the only option for many people in rural Maine who don’t qualify for state aid but cannot afford private insurance.

Pingree’s bill will now go to the Senate, and if passed will face one final vote in each body before going to Governor Baldacci for his signature.