Presentation to a Maine Health Access Foundation Briefing on LD 1333

The new insurance law is NO SOLUTION.  It fails to address the real problem which is the rising cost of health care for everybody.  Until we get a handle on that we are no better off.  Effectively we are simply shifting the DECK CHAIRS on a sinking ship.

The insurance law CUTS BOTH WAYS.  If you allow those who are younger and live in better served areas of the state to pay less, then those who are older and live in other parts of the state will pay more.  While the reinsurance program lessens these discrepancies in the individual market, there is no such provision for small businesses.  Assuming insurance companies implement this law as intended, MANY SMALL BUSINESSES may be in for a RUDE AWAKENING when they get their next rate quote.  This is especially true for those businesses in rural areas with older employees – by older I mean over 45.  The map on the screen is based on analysis by Gorman Actuarial for the Bureau of Insurance.  The projected change in average rates is based on a 3 to 1 rate band based on age and no geographic rating.  I’d be happy to talk about this analysis more during the Q&A.

The insurance law will likely have a DISPROPORTIONATE IMPACT on rural residents and communities.  This is not only because of changes in the rating bands but also due to the possible introduction of incentives for people to seek care farther from home.  Dr. Erik Steele, Chief Medical Officer of Eastern Maine Healthcare Systems, wrote an op-ed titled “Gutting Maine’s Health Care System” that appeared in the Bangor Daily News in May.  In it he writes, 
“Cutting off the rules that protect Maine’s health insurance market from increased competition could shred the financial stability of Maine’s rural hospitals…The insurance rule changes in LD 1333 almost certainly will…(threaten) the ability of those hospitals to hold Maine’s rural health care delivery system together.”

While it has yet to be seen how these rules will take effect, in the rush to foster competition in the insurance market, proponents seemed INCAPABLE – or UNWILLING – to acknowledge the potential UNINTENDED CONSEQUENCES of such actions and to consider other solutions that could have achieved their stated objective of lowering health insurance costs for all.  This issue also points to a flaw in our delivery system highlighted by Dr. Steele.  To stay afloat, rural hospitals find themselves in the unenviable position of subsidizing less profitable and routine activities such as office visits and preventive care with more costly diagnostic procedures and operations.  [[As an economist, I can’t help pointing out that where health care is concerned, competitive markets are virtually nonexistent – not just in Maine but throughout the United States.  In a competitive market, you need a LEVEL PLAYING FIELD, GOOD INFORMATION, and REAL CHOICE.]]

Lastly, the insurance law gives MORE POWER AND PROFITS to insurance companies.  These companies have more power than ever to influence where a patient gets care and can potentially do so based on cost alone.  Although the State Employee Health Plan is often cited as a model (and justification) for eliminating geographic criteria, in fact, the State Plan provides incentives based almost entirely on quality of care, not cost. 

The reinsurance program effectively SUBSIDIZES risks for insurers in the individual market.  This actually erodes the incentive for insurers to do what they should be doing in the first place – that is: POOL PEOPLE; SPREAD RISK; NEGOTIATE BETTER RATES with providers; and REWARD BETTER CARE AND RESULTS.  Further evidence of the power being given to insurance companies is the fact that of the 11 members that will serve on the reinsurance board, 5 are appointed by insurers – talk about letting the fox guard the hen house.

Of course, the biggest give away is the elimination of rate review in the individual market.  Rate review has been a very effective tool for consumers in moderating rate increases.  During the most recent review, Anthem proposed a 10% increase in individual rates.  Under the new law, this would have been granted pro forma.  The review process capped the increase at 5.2%.  I am hard pressed to see how eliminating rate review benefits Maine people.

In conclusion, the intent of this law is justified.  All Maine people should have access to affordable, quality health care.  Unfortunately, this law falls short of that goal and gives up too much.  At the end of the day, the ship is still sinking.  It’s time we stop moving the deck chairs and actually work together to fix the leaky hull.

Garrett Martin, MECEP Associate Director