Dirigo plan’s fate depends on firms State must convince businesses to enroll

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Maine businesses with 50 or fewer employees will soon be faced with a decision about signing on with Gov. John Baldacci’s innovative but untried health insurance plan, called Dirigo Health-CareWorks.

The success of DHCareWorks – and the governor’s ambitious goal of holding down health care spending by increasing the number of Mainers with comprehensive health care coverage – rides on the ability to convince the state’s 41,000 small businesses to enroll workers.

As health officials fine-tune the plan, private insurance companies are preparing to bid on a contract that promises a sizable infusion of new customers. But the key players are Maine’s small businesses, which must decide whether the new plan represents a significant improvement over insurance products already on the market. If too few employers buy in, DHCareWorks may never get off the ground.The state hopes to enroll no more than 31,000 Mainers in the first year, a number that will allow the program to grow at a sustainable pace without straining its complex funding. While the minimum critical mass hasn’t been established, Dirigo Health’s executive director Tom Dunne confirmed Tuesday that participation by employers and their workers is essential to the program’s success. In part, he said, that participation will ensure the ongoing interest of the private, for-profit insurance company that is awarded the contract.

But in the long term, Dirigo’s self-funding mechanism also draws on health care cost savings to pay for the premium subsidies that keep the plan affordable for low-income workers. Fewer enrollments mean less money saved, and less money saved means less money available to encourage enrollments. If participation falls short of the as-yet-undetermined minimum, Dunne admitted, “We could have a material problem.”

Depending who’s counting, between 130,000 and 180,000 Mainers – employed, self-employed and unemployed – lack coverage of any sort. Thousands of others are struggling to pay for policies that cover only a small portion of their expenses or require thousands of dollars in out-of-pocket spending before covering anything at all.

All Maine hospitals and many clinics are required to treat all comers regardless of ability to pay. These providers make up lost “bad debt and charity care” dollars by jacking up charges to insurance companies for their clients’ care, which further inflates the cost of commercial coverage. This “cost-shifting” spiral puts even basic preventive care out of reach for many people and depresses economic growth. Small businesses, in particular, say their inability to provide affordable health coverage puts them at a competitive disadvantage when it comes to attracting and retaining qualified employees.

Maine’s Dirigo Health plan is unique in attempting to interrupt the cost-shifting cycle, by providing affordable, state-subsidized coverage, limiting hospital spending and creating a coordinated statewide system of services and providers.

The particulars of the DHCareWorks insurance product – how much it will cost, what it will cover, who qualifies for subsidy – still are evolving behind the doors of the governor’s Office of Health Care Policy and Finance. Dunne said consumers should expect a final product that is somehow “piggybacked” onto an existing model.

Dunne compared the process to customizing a car, with insurers adding Dirigo-ordered features – premium subsidies, sliding-scale deductibles, a tiered drug benefit and extensive preventive care coverage – onto the basic “chassis” of state-mandated minimum coverage and protection from the financial impact of severe illness or injury.

“We’ll be letting the carriers specify which chassis is best-suited,” Dunne said.

Once health officials have finished tinkering with it, commercial insurance companies such as Anthem, Cigna and Aetna will be offered a chance to bid on the DHCareWorks contract and the opportunity to add thousands of new policyholders to their book of business in the first enrollment year. Program designers expect to expand enrollment eligibility over the next five years, opening the program to anyone who lacks affordable coverage.

But will small businesses sign on with Dirigo? The preliminary design for DHCareWorks released last month at the State House anticipates a required employer contribution of 60 percent of the employee premium. At least 75 percent of a business’s workers must sign up in order for an employer to participate. The employer must offer group-rate coverage to an employee’s family, but in a departure from earlier plans, the employer will not be required to pay any portion of family coverage.

Dana Connors, president of the Maine State Chamber of Commerce, said DHCareWorks is eagerly anticipated by the business community. “What I’m hearing is pretty consistent,” Connors said in a phone interview last week. “People are telling me, ‘The sooner the better – let’s get the plan out here and see how it fits for us.'”

Connors praised the plan designers for front-loading it with 100 percent coverage for preventive care such as checkups, immunizations, mammograms and other services. Wellness education and early detection and treatment of abnormalities, he said, are key to keeping costs down.

“Dirigo is to disease prevention what workplace safety is to workers’ compensation insurance,” he predicted.

Connors said employers are relieved the plan won’t require them to pay for family coverage as was initially anticipated. And, he said, Maine employers want to do right by their workers and offer comprehensive health benefits, both as an incentive to keep good workers loyal and out of a sense of civic-mindedness.

Still, Dirigo’s low-end option for a single employee without children is expected to cost about $260 a month with a $1,750 deductible. The employee would be responsible for 40 percent of the premium, or $104 a month. Depending on the employee’s income, the state may subsidize or even waive the employee share. The employee also may be eligible for a lower deductible. The employer would remain responsible for the full 60 percent share of the premium, or $156 for each enrolled employee.

Health plans vary widely and it’s difficult to make an apples-to-apples comparison, especially with DHCareWorks still under wraps. But, as an example, Anthem Blue Cross and Blue Shield of Maine has small-group policies that start, for a single enrollee, at about $190 an month with a $5,000 deductible and go up to about $330 a month with no deductible. The company’s best-selling plan in Maine costs about $270 and carries a $1,000 deductible. Employers may choose to pay a portion of the premium or require workers to pick up the entire monthly cost.

Tarren Bragdon, director of health reform initiatives for the conservative Maine Heritage Policy Center, said DHCareWorks is a different product than originally envisioned. A former state representative from Bangor, Bragdon served on the Health Action Team of stakeholders that advised Baldacci’s health reform team in the early days of the Dirigo initiative.

“Dirigo was going to be innovative,” he said Monday. “But this product is not much different from other plans.” Even if the coverage is substantially better than comparably priced plans, DHCareWorks is not priced significantly below other small-group policies, Bragdon said, and businesses still may be unable or unwilling to commit to enrolling employees.

“Dirigo is really testing whether premium subsidies will make the difference,” Bragdon said. “But if that were the case why wouldn’t [workers and employers] have bought five or six years ago when [health insurance plans] cost 20 percent less?”

National studies show that 80 percent of families consume less than $2,000 a year in health care, Bragdon said, raising the question of whether tax-deferred health savings accounts backed up with high-deductible insurance might not be a logical alternative to traditional coverage.

MHPC posts a “Dirigo Watch” newsletter on its Web site at www.mainepolicy.org.

The DHCareWorks proposal should be ready for insurers to bid on by the end of the month, and director Dunne said enrollments are expected to begin midsummer. But before anyone is signed up, the state and some private groups will be taking DHCareWorks on the road to raise interest and awareness. According to Dunne, Mainers can expect to see ads soon in the media as well as community presentations to business groups.

The Maine Small Business Alliance has planned a statewide schedule of community presentations that started earlier this month in Wiscasset. MSBA director Deborah Cook said Tuesday that the sessions are aimed at education and discussion, not “cheerleading.”

Although Dirigo still is being refined, Cook said it’s important to explain the concept and give employers the opportunity to think it over. “We’re not telling businesses what to do, but we do think this is a courageous step and we really do want it to work. It may need to be fine-tuned, but small businesses really need this,” Cook said.

The first session drew representatives from about 12 businesses, she said, and was met with a combination of hope and skepticism.

“People know this is an innovative, challenging process, and they have a lot of questions,” she said. “They understand that [Dirigo Health] doesn’t propose just a short-term solution but a long-term answer. They’re concerned with their bottom line, because that’s their job. But they also have a sense of their role in helping to create a healthier community.”

MSBA will present a Dirigo Health Forum for Small Businesses from 9 to 10:30 a.m. Tuesday, April 27, at the offices of Bangor Savings Bank, 99 Franklin St., Bangor.

Business owners, employees and others with questions about DWCareWorks or the educational forums may contact the Maine Small Business Alliance through e-mail at dcook@msb-alliance.org, by phone at 622-6500, or at its Web site at www.msb-alliance.org.

Information from the state is available at www.dirigohealth.maine.gov.