HALLOWELL – Could lower health insurance rates for Maine be on the horizon?

The Legislature is weighing the merits of L.D. 1333, a bill that aims to reform Maine’s insurance laws to bring lower insurance premiums to Maine consumers.

There is a lot of confusion about how L.D. 1333 works, however, and fear that we will simply shift costs to the benefit of some but the detriment of others.

L.D. 1333 starts from a simple principle: Allow Maine’s insurance markets to function. This may sound simple, but it is something we have strayed from for years.

Remember that insurance and health care are two very different things. Insurance is about transferring risk and spreading it among a large group of people.

Maine’s individual insurance market consists of about 40,000 people today. Rates are extremely high, resulting in many people unable to afford coverage, while those that do purchase have very high deductibles averaging over $7,500 compared to a national average of $1,500.

LOWER RATES FOR ALL

Anthem recently disclosed in the Bureau of Insurance rate hearings that 11 percent of the people covered by individual plans account for 95 percent of their claim costs.

L.D. 1333 creates a reinsurance pool called the Maine Guaranteed Access Plan to help segregate the highest cost users. Their claims are then subsidized by a broad-based assessment on all privately insured people in Maine. This spreads the cost from the current 40,000 individual policyholders to over 600,000 of us with private coverage.

The new assessment begins as the Dirigo assessment phases out and is capped at about half of the Dirigo assessment. This means that the assessment still represents a net savings to current policyholders. This results in individual insurance rates dropping for everyone, whether you are healthy or ill.

L.D. 1333 also adjusts the amount that insurers can vary rates between different age applicants. Statistically, an older adult consumes five times the health care services of a young adult.

Maine’s community rating laws only allow an insurer to charge an older adult 50 percent more than a younger adult. The theory was that premiums for older adults would drop while younger applicants would pay more.

In reality, younger adults pay much more while older adults saw little premium relief. In fact, premiums in general have skyrocketed under these laws as more young people choose not to purchase, leaving fewer and fewer people to spread the costs among.

If you compare Maine and New Hampshire Anthem premiums with a $5,000 deductible you will find similar rates for a 60-year-old adult ($528 in Maine, $517 in N.H.) yet significantly lower monthly rates for a 20 year old ($352 in Maine, $136 in N.H.).

The Affordable Care Act (ACA) signed by President Obama allows premiums to vary by 300 percent. L.D. 1333 moves Maine in line with the ACA for both individual and small groups, phasing in over a period of years. This will help lower premiums for younger applicants, increasing the total number insured.

This combined with the Guaranteed Access Plan has the potential to lower rates for all age groups.

COST DRIVERS TARGETED

Another important provision of L.D. 1333 is the repeal of Rule 850. This section of Maine’s insurance code sets travel restrictions around insurers’ provider networks, meaning they can’t require policyholders to travel great distances to get treatment.

Though well-intentioned, Rule 850 can raise rates substantially for rural communities. A company in Presque Isle, for example, will pay over 30 percent more for the same insurance plan they could purchase if located in Portland.

For those who argue in favor of Rule 850, I would remind them that the state received an exemption from Rule 850 for state employees and saw a savings as a result. It is time for rural Mainers to receive the same benefits afforded to state employees.

There are other provisions in L.D. 1333 that are important, such as the creation of a small business tax credit and new product innovations and allowing for shopping across state lines. It is exciting to see a bill like this gain traction.

L.D. 1333 takes steps to truly address the health insurance cost drivers in Maine while staying compliant with the ACA to avoid turmoil in future years as the ACA unfolds. Maine can’t wait for the promise of lower rates in the future and now we may not have to. L.D. 1333 is a significant step in the right direction for Maine.