The biggest question facing Gov. John Baldacci’s proposal to take DirigoChoice away from Anthem and make it a self-insured plan is who would be responsible for paying the bills if claims came in higher than the funds available.

The second major question, asked at a hearing before the Insurance and Financial Services Committee Tuesday, is whether bringing the program in-house would save the state any money.

Kevin Gildart of Bath Iron Works said the proposal was based on “false expectations.”

“Going self-insured won’t necessarily save any money,” Gildart said. BIW has been self-insured, but is now back in the regular insurance market.

“The answer does not lie in whether you are self-insured or fully-insured. It lies in what the market has to offer,” in terms of health care charges, he said.

Baldacci is pushing the plan as a way to “take out the profit-making middleman,” and save on administrative costs and profits. He said his plan would put DirigoChoice in the same position as other self-insured companies in the state like Cianbro and L.L. Bean.

But even the Massachusetts-based guru hired by the governor to help redesign DirigoChoice said the administrative savings wouldn’t amount to much, if anything, since the state plans to hire an outside company to administer the program.

“Quite frankly, those are the same costs imbedded in a (fully) insured contract right now,” said Steve Tringale, a Massachusetts-based consultant hired by the governor earlier this year.

Tringale said the real savings would come from negotiating lower costs for health care, including drugs, and doing a better job of managing chronic disease.

“We’re looking for the best thinking of carriers and providers who are out there…to knock down the trend line, the cost curve that most people are seeing on the claims side,” which eat up 85 to 90 cents of every premium dollar, he said.

The other savings usually enjoyed by self-insured plans is not having to pay for the insurance company’s risk. If claims come in lower than expected, self-insured plans get to keep the money. But the opposite is also true; they are liable for claims that come in over expectations.

“What if the plan has a problem and cannot pay its bills?” asked Rep. Kevin Glynn, R-South Portland.

While the governor’s proposal says “the assets and liabilities of the plan are solely those of the Dirigo Health Agency, i.e. the full faith and credit of the state is not provided,” Tringale said he was not sure the state couldn’t be held liable if the pool ran dry.

“Ultimately, I don’t know the constitutional issues of whether a state agency can fully exempt itself,” Tringale said.

DirigoChoice currently offers an Anthem plan to small businesses and individuals, with state subsidies available to those making less than 300 percent of poverty – defined as $29,000 for a single adult or $58,000 for a family of four. There are 9,088 people enrolled.

The governor’s plan would put control of the program under an expanded Dirigo board of trustees, with financial and insurance experience, which would have the authority to end the contract with Anthem when it expires on Dec. 31 and go self-insured.

A risk pool would be established to cover potential claims and the plan would buy stop-gap or reinsurance to cover extraordinary claims.

The legislation requires the risk pool to be equal to at least two months worth of anticipated claims and administrative costs.

Rep. Jonathan McKane, R-Newcastle, questioned whether that was enough, and Tringale didn’t disagree.

“It’s less than you would want in the longer term,” Tringale said, but added it’s “not unreasonable” for a startup. He said initially the plan would buy more stop-gap insurance to back up the risk pool until it grows.

Sen. Peter Mills, a member of the insurance committee and Republican candidate for governor, said Baldacci’s plan is simply intended to be a distraction.

“The real issue is the revenue being used to support this program,” Mills said, which this year is a $43.7 million fee on insurance carriers and the self-insured, which ultimately will be passed along to consumers.

“This isn’t addressing the underlying problem, which is why on earth do you want to tax all these people,” said Mills, and make everyone else’s insurance rates go up to support DirigoChoice.

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