The state plans to tax insurance companies and self-insured businesses based on the claims they pay out to privately insured Maine residents starting in January to help fund the Dirigo Health insurance program, with hopes of collecting up to $48 million in 2006.

The amount needed will depend on how many people are enrolled in the program. The $48 million budget assumes 31,000 enrollees. As of May 1, there were 6,366.

Under a compromise negotiated by the Legislature’s Insurance and Financial Services Committee last week, the tax – technically known as a savings offset payment – will be collected based on paid claims versus premiums, and none of the money can be used to fund the administration of the Dirigo Health program. There is nothing to prevent the companies from passing the fee onto consumers.

Trish Riley, head of the governor’s Office of Health Policy and Finance, said it’s wrong to call it a tax because it is really a recouping of savings now going to hospitals and doctors because of changes made under the Dirigo Health legislation passed in 2003. That law said the state could charge a fee of up to 4 percent of premiums collected by private health insurance plans, but it didn’t outline how the money would be collected from self-insured companies like Bath Iron Works or Hannaford and even some hospitals. It is estimated that up to half of the state’s insured employees are covered by self-insured plans.

The state’s Bureau of Insurance has no information on how much is paid out in claims. The only number easily available is the amount of premiums paid to private health insurance companies, which in 2004 was just over $1 billion.

Just what percent of paid claims will be collected – up to the 4 percent ceiling – will be determined by a working group made of the Dirigo Health board of directors and representatives from the business community. It will be based on how much money is saved in the state healthcare system this year.

The Dirigo Health law, passed with bipartisan support, has put largely voluntary limits on the profit growth and patient costs in the state’s 39 hospitals and mandated limits on the amount of new health-care related construction in the state – seen as a significant driver of healthcare costs.

Hospitals also are supposed to see a drop in their bad debt and charity-care costs because more people will be insured by the state subsidized DirigoChoice health insurance – savings now being downplayed by the administration.

While 6,366 people were enrolled in Dirigo as of May 1, it’s unclear how many were previously uninsured. While some say it could be as low as one-third of those now signed up, Riley said there is no good data currently. A phone survey is being done by the Muskie School.

She also said the $48 million the state hopes to collect is a rough estimate of what it will cost to keep the DirigoChoice insurance program going and fund the Maine Quality Forum, a program designed to cut health care costs by arming residents with cost and quality comparisons. Administration costs will be covered by some of the remaining $53 million in startup money for the program and from premiums.

“This is a very new program. There are no sort of patterns yet,” in terms of how many people are going to be in which discount level and therefore be entitled to additional state subsidy.

Under DirigoChoice, people who enroll are eligible for discounts on their portion of the premium based on income level – going up to 300 percent of poverty. Those who are Medicaid eligible essentially get a 100 percent discount, but the state can apply for federal Medicaid matching funds to cover their costs. Employers are asked to pay 60 percent of premiums and employees 40 percent.

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