The Smart Money: How Mainers are paying for health insurance 'reform'

Posted Wednesday, November 28, 2012 in Analysis

The Smart Money: How Mainers are paying for health insurance 'reform'

Source: Bureau of Insurance

by Gina Hamilton

When Public Law 2011 Chapter 90 was being debated last year in the Maine Legislature, supporters insisted that the reason Maine's health care costs are among the highest in the nation was that the market was over-regulated.  End some of the red tape, they argued, and the free market will provide competition, and bring down costs.  Supporters went so far as to say that all uninsured people in Maine would be able to afford coverage.

Although much of the plan remains to be implemented, four of its provisions have already gone into effect, and have already caused changes to the insurance market, as well as higher net premiums for most policyholders. 

What the early evidence suggests is that the idea that giving insurance companies free rein and letting them set their own rates without oversight hasn't been a good deal for Maine policyholders. 

Data published in September by the state’s Bureau of Insurance showed that in the year since Chapter 90 took effect, 11.4 percent of small groups renewing their policies have seen premium decreases, compared to 3.5 percent that saw decreases in the year before the law took effect. The small groups seeing lower insurance rates are more likely to be in southern Maine. Before Chapter 90, according to the Bureau of Insurance, there was generally little geographic variation in insurance rate increases and decreases.

However, data also showed that when small groups were quoted higher rates to renew their policies, the rates increases were slightly more likely to fall in the 40 percent to 80 percent range after the law took effect than they were before. Rate increases between 0 and 20 percent were slightly more common before the insurance overhaul took effect last year.

Here is a graph for the percentage of small group renewals by geographic area before Chapter 90, and the amount of increase in premium:

Here is a graph of the percentage of small group renewals by geographic area after Chapter 90, and the amount of increase in premium:

Both graphs are courtesy of the Maine Bureau of Insurance.

Those small groups being quoted rate increases of 40 percent or more were more likely to be in northern and eastern Maine.

And that may be why the new Democratic Legislature is already talking about rescinding Chapter 90.

During the campaign, in a closely contested race in Lincoln County (a region hit by high rate increases for small businesses, particularly), a voter asked then-Rep. Les Fossel (R-Alna) at a candidate town hall meeting whether the candidate, running for Senate (Dist. 20-Lincoln), still supported Chapter 90.

Kelsy Hartley, President of Hartley Marine Services, told Fossel at the meeting that her rates have gone up 23 percent under the new law, making things difficult for her business, which runs three tugs out of Boothbay. But when she asked if he supported the bill he refused to answer, saying that he wouldn't respond because she had called it "the rate hike increase."

Fossel went on to lose his race. Chris Johnson, who won the race, has been an outspoken opponent of Chapter 90.

He's not the only Democrat opposed to the deregulation of insurance companies in Maine. 

Sharon Treat (D-Hallowell) submitted legislation even before the election to rescind or completely revamp what the Democrats called the 'rate hike law' on the campaign trail.  Because 90 percent of small businesses were hurt by it, the name stuck and resonated, and may have had much to do with the stunning GOP losses in the Statehouse this year. 

However, the new Democratic majority have to overcome a promised veto from Gov. Paul LePage if they do manage to pass a bill, and the only way to do that is to work with Republicans whose own constituents are telling them how the law has hurt them and their small businesses.  Since many of these businesses are in Republican strongholds in the northern part of the state, there is no shortage of them.

As a result, Republicans, even in reasonably safe seats, are nervously rethinking their support of Chapter 90.  Republican supporters of the bill like Sen. Rodney Whittemore (R-Skowhegan) and Rep. Kenneth Fredette (R-Newport), the newly elected House Republican leader, say they’re open to working with Democrats on improving the bill.

“If things aren’t working, then we need to look at those things,” Fredette said. “We certainly are willing to work across the aisle to see what can be improved.”

Chapter 90, ironically, may have provided an unexpected boost for Dirigo Choice, a Harvard Pilgrim/Maine State partnership that provides health insurance for individuals and small businesses in the state.  Not subject to the Chapter 90 deregulation process, Dirigo has kept its rates fairly low and provides state-sponsored premium support for individuals and families making less than 400 percent of the federal poverty line.  Many small businesses are deserting the commercial market for Dirigo Choice, which is swelling its ranks for both individuals and small business customers.

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