Dirigo Health first step in Baldacci plan Agency would subsidize costs of insurance for state’s needy

AUGUSTA – Gov. John E. Baldacci says his first-in-the-nation state plan to provide universal access to medical insurance, hold down health care costs and increase quality has to go forward now – no more waiting for solutions at the national level.

“Mainers understand that we can’t sit back and wait for our ship to come in,” the governor said. “We must build the ship ourselves. And we will.” Baldacci unveiled his plan Monday morning, promising to provide universal access to health insurance within four years.

Key to the governor’s proposal is the formation of a quasi-public agency to be called Dirigo Health. If approved by the Legislature, the agency, which will be governed by a board, will act as a kind of public insurance agency, contracting with private insurance companies to provide low-cost, comprehensive health coverage for the owners and employees of Maine’s small businesses and their families.

According to the Maine Small Business Alliance, close to half of Maine workers are employed in companies with 20 or fewer employees, many of which are unable to offer insurance. The Dirigo plan, when it opens for business in July 2004, will be available to workers from companies of 50 or fewer employees.

Participating employers will pay 60 percent of their workers’ premiums under the plan. Employees would pick up the remaining 40 percent, with 20 to 80 percent subsidies available on a sliding scale.

Under the Dirigo plan, an employee’s share of the premium would cost between $80 and $320 a month for a family of four, depending on income.

The subsidies that would enable more Mainers to afford Dirigo Health Insurance will be funded through a surcharge on the premium revenues of all private insurance companies doing business in Maine. Subsidies will be available to households earning up to 300 percent of the federal poverty level. That’s about $55,000 annually for a family of four.

Companies such as Anthem Blue Cross and Blue Shield, Aetna and Cigna increase premiums to cover the added expense charged by hospitals seeking to recover charity costs. The shifting of this “bad debt and charity care” costs Maine insurance buyers about $275 million each year in premium charges.

Recouping about 60 percent of that amount through a 4.1 percent surcharge on total premium revenues and using it to provide the subsidies for comprehensive coverage is simply a matter of reallocating “money already in the system,” Baldacci said, although insurance companies are referring to the proposed assessment as a tax.

Dirigo Health also will serve a regulatory role, ensuring that participating insurance companies offer high-quality service and limit administrative costs and profit margins.

Maine’s lowest-income workers will have a choice of participating in the Dirigo plan or enrolling directly in traditional Medicaid, now called MaineCare. Dirigo will use some of its premium dollars and its status as a public health organization to attract matching 2-to-1 federal Medicaid dollars, enabling the state to expand the MaineCare program by as many as 14,000 adults.

Private insurance companies will continue to operate independently of the Dirigo program, offering insurance to large and small employee groups and to individuals who elect not to use the state program.

At this point, there is no plan to mandate the participation of private insurance companies in the Dirigo plan. If no private insurers choose to participate, Dirigo may start its own insurance program.

The plan designers say Dirigo Health could start enrolling participants by July 2004. Baldacci says his goal of universal coverage could be realized within four years, although there is no guarantee that all uninsured Maine residents will choose to participate even with the more affordable rates.

The Dirigo plan itself claims to be revenue-neutral except for startup and administrative costs -about $875,000 over the next two years. A portion of that amount will be available as loans to help health care providers develop standardized electronic billing and record-keeping, as required in another part of the plan.

Baldacci’s proposal has found wide support among consumer advocates and Democratic lawmakers. Large business interests, the health care industry and Republicans have expressed more skepticism, but just about everyone agrees the current health care system is in crisis.

As many as 150,000 Mainers now lack medical insurance altogether, with another 30,000 having no insurance at some point during the past year. A growing number of others are opting for so-called “catastrophic” coverage, with high out-of-pocket deductibles.

The upward spiral of health care costs and the downward trend in affordable coverage has strong implications for the state’s overall economic health.

The Baldacci plan will be presented to the Legislature within a few days and reviewed in public hearings and work sessions in coming weeks. The governor and his supporters hope to see the complex bill passed by the Legislature by the end of the current session, which could come as soon as the end of May.