Saturday, December 7, 2013
Maine may be forced to shelve a new, state-sponsored health insurance program that aims to reduce premiums on individual plans when a similar, more costly federal program starts next year under the Affordable Care Act.
The state's so-called "reinsurance" program, which started last July, is funded by a $4 monthly tax on about 532,000 Mainers who are covered by group and individual private plans. The $25 million annual program appears to be working as planned, leading some to question why Maine must participate in the federal program.
The federal program will charge a $5.25 monthly fee and operate for only three years, reducing individual premiums across the nation. After that, various cost-leveling features of the Affordable Care Act are expected to make reinsurance for individual plans unnecessary.
"We don't want to pay twice for the same thing," said Eric Cioppa, Maine's insurance superintendent. "But the money that Maine is raising for reinsurance ought to stay in Maine. There's no guarantee that what Maine contributes to a national pool would come back to us."
Cioppa sent a letter last week, asking the U.S. Department of Health and Human Services to allow the state to maintain its lower-cost, locally controlled reinsurance program rather than join the national program. Cioppa had received no response as of Friday.
If the DHHS refuses to grant Maine a waiver from the federal reinsurance program, Cioppa and other insurance officials have recommended that the Legislature suspend the state reinsurance program while the federal program is in effect.
The Legislature's Insurance and Financial Services Committee will be reviewing the issue in the coming weeks.
"It may not be possible, but we want to preserve what we're doing in Maine," said committee co-Chairman Sen. Geoffrey Gratwick, D-Bangor. "Because in this particular instance, I think the state is going to do a better job than the federal government."
If the state's reinsurance program is suspended, it's unclear whether it would be reinstated after the federal program lapses. "We'll have to see what happens then," said Rep. Joyce Fitzpatrick, R-Houlton, ranking minority committee member.
In Maine, Anthem BlueCross BlueShield, MEGA Life and Health Insurance Co. and Harvard Pilgrim Health Care sell about 34,000 individual policies costing about $168 million in annual premiums, Cioppa said.
The state program is part of insurance reform passed by a Republican-led Legislature in 2011, just before the DHHS announced rules for its own reinsurance program under the Affordable Care Act. Maine officials continued to develop a state program because the future of the ACA was unclear.
The state program was set up to help insurance companies lower premiums on individual plans by spreading higher medical costs of unhealthy individual plan holders among all private insurance buyers.
Lawmakers established the private, nonprofit Maine Guaranteed Access Reimbursement Association, overseen by an 11-member board of directors, to create and oversee the program. The board has come under scrutiny because it lacks consumer representatives and meets privately.
The MGARA is expected to lower premiums for all individual policy holders by 10 percent to 15 percent, but it's too early to see that kind of result yet, said Christopher Howard, a lawyer with Pierce Atwood in Portland who works for the association.
Anthem, which anticipated an average rate increase of 21 percent on individual policies in 2012, had a rate increase of just 1.7 percent under the reinsurance program, Cioppa said.
In its first year, the MGARA took in 3,225 individual policy holders who have qualifying high-risk health conditions or were voluntarily designated by their insurance companies, Howard said.
The insurance companies submitted about $5 million in claims through December and the association started issuing reimbursements Jan. 6, he said.
In addition to $4 monthly assessments on each privately insured Mainer -- $192 per year for a family of four -- the MGARA takes 90 percent of premiums that insurance companies charge to high-risk individual plan holders.
For a high-risk individual with a $5,000 deductible and a $400 monthly premium, $360 of the premium goes to the MGARA and $40 is retained by the insurance company, Cioppa said.
After the individual pays the $5,000 deductible, the MGARA will pay 90 percent of the insurance company's costs between $7,500 and $32,500 and 100 percent of everything after that, Howard said in a memo to the legislative committee.
The federal program is assessed differently and covers 80 percent of claims between $60,000 and $250,000 for all individual plans, Howard said.
Staff Writer Kelley Bouchard can be contacted at 791-6328 or at: