January 20, 2013

Health insurance reform faces scrutiny

Critics say the 2011 law hurt small, rural firms; backers counter that it has increased options and cut costs.

By Kelley Bouchard kbouchard@pressherald.com
Staff Writer

Gary Peachey, owner of Peachey Builders in Augusta, saw his small company's health insurance costs decrease by nearly 5 percent in 2012.

Meanwhile, Ken Simons, who operates a physical therapy practice with offices in Scarborough and Sanford, saw his health insurance costs increase by about 30 percent.

Peachey and Simons represent the diverse experiences of small Maine businesses in the wake of controversial health insurance reform legislation passed in May 2011 by the Republican-led Legislature. Public Law Chapter 90 took effect five months later, dramatically shifting the cost of employee benefits for thousands of companies across Maine.

A little over a year later, with Democrats back in charge, the Legislature's Insurance and Financial Services Committee is poised to review the law's benefits and drawbacks. Titles of several bills targeting different parts of the law were expected to be filed late Friday with the statute revisor.

Rep. Sharon Treat, D-Hallowell, committee chairwoman, said she doesn't anticipate an effort to repeal the entire law. However, certain aspects will be closely examined and may be overturned, she said, including a less-rigorous review of rate increases for small-group and individual plans.

"We need to find out how it has worked or not worked," Treat said. "Anything we do hopefully will be done with bipartisan support. I personally am not coming in with the intention to repeal the whole law."

The law included three major health insurance reforms:

Allowed insurance providers greater freedom to vary rates based on a company's location and other factors, such as the ages, occupations and smoking status of employees.

Eliminated a requirement for prior state approval of rate increases of less than 10 percent on individual policies and small-group plans, defined as those that have 50 or fewer members.

Added a $4 monthly tax on each person covered by all private health insurance policies, creating a so-called reinsurance fund that helps insurance companies cover high-cost individual plans.

Sen. Rodney Whittemore, R-Skowhegan, also sits on the insurance committee. He agrees that the law deserves a balanced bipartisan review, but he is openly in favor of the law, praising it as a move toward market deregulation and greater competition.

"PL 90 is a very good law and for the most part it has worked very well," Whittemore said. "It has opened the door for more insurance companies to come into the state, which will increase options and decrease costs."

Whittemore and other supporters say the law is working because it has lowered premiums for some Maine companies, especially those in southern Maine with younger, healthier employees.

OVERSIGHT, RATE HEARINGS AT ISSUE

Critics counter that insurance rates may have decreased for some, but they have increased substantially for small businesses in rural areas with older employees, especially in northern Maine.

Consumers for Affordable Health Care, an Augusta-based advocacy group, released a report late last summer highlighting those patterns.

All individual policy holders younger than 40 saw rate reductions, while most Mainers age 55 and older saw their premiums increase, according to the report, "Few Winners, Many Losers: Evaluating the Impact of Key Provisions of Maine's New Health Insurance Law to Date."

The report also concluded that 90 percent of small businesses experienced increases, while 10 percent experienced decreases.

"Proponents said this would immediately reduce rates for everyone, and in fact they went up for 90 percent," said Joseph Ditre, executive director of Consumers for Affordable Health Care.

Ditre and other critics question the law's removal of the state's ability to deny or hold public hearings on rate hikes of less than 10 percent.

They also worry about a lack of public oversight for the Maine Guaranteed Access Reinsurance Association, a corporation created by PL 90 to administer the reinsurance fund.

"It's basically subsidizing the insurance companies," said Treat, the insurance committee chairwoman.

Joel Allumbaugh, an insurance broker and a policy director for the Maine Heritage Policy Center, a conservative think tank, challenges many negative conclusions about PL 90, noting that 97 percent of small businesses saw rate increases before the law went into effect.

"We're actually seeing more winners than losers," said Allumbaugh, who also sits on the 11-member board of the Maine Guaranteed Access Reinsurance Association.

In fact, Maine's small group market experienced an average rate increase of 11 percent in 2012, down from an average increase of 17 percent in 2011, according to the Maine Bureau of Insurance.

Drawing a conclusion from that reduction is difficult, however, because average rate increases ranged widely over the last decade or so, from 33 percent in 2001 to 8 percent in 2006 to 21 percent in 2010.

Allumbaugh also disputes concerns about the lack of public oversight of the reinsurance fund, which raises more than $25 million a year by collecting $4 a month from more than 532,000 privately insured Mainers. The money is used to help insurance companies lower premiums for high-cost individual policies.

Treat said she hopes to gather detailed and clarifying data from the insurance bureau and other sources in the coming weeks that will help legislators determine which aspects of PL 90 should be kept and which should be changed. Her committee can expect to hear conflicting testimony.

DIVERGENT EXPERIENCES

For Gary Peachey, the Augusta building contractor, the law has worked well, especially the section that allowed him to join more than 20 other small businesses in forming a health insurance company called MaineSense, administered by Martin's Point Health Care.

Peachey also adopted other newer health insurance options for his 25 employees, including a health savings account and a health reimbursement arrangement. Peachey figures his company's health care costs will drop 10 percent to 20 percent over five years.

That's a positive outlook, considering his rates increased that much each year for the last few years.

"Maine employers are being forced to be innovative," Peachey said. "We've got to keep coming up with new ways to keep health care costs down."

For Ken Simons, the physical therapist, the law has been financially devastating, pushing premiums for himself, his wife and one employee beyond the usual annual increase of 10 percent to 15 percent to about 30 percent in 2012. He's also earning less because of declining reimbursements from his clients' health insurance.

"I'm really getting hit from both sides," Simons said. "To make the bottom line, I've gone from working 50 to 60 hours a week to working 70 to 80 hours a week. In the end, I'm making a buck and a half an hour and I have a doctorate in physical therapy with nearly 25 years of experience."

Staff Writer Kelley Bouchard can be contacted at 791-6328 or at:

kbouchard@pressherald.com

 

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