Dirigo Health launches Maine to forefront of progressive reform

With the passage of Dirigo Health, Maine has launched a first-in-the-nation plan to significantly reduce health care costs and make health insurance available to every Maine resident. Over the next five years, the goal of Dirigo Health is to provide coverage to the estimated 136,000 to 180,000 Mainers currently without health insurance.

Equally important, it aims to control the growth of health care costs for everyone. In short, by utilizing an innovative blend of private and public resources, Maine has launched itself to the forefront of progressive health care reform.

We frequently hear from constituents – both businesses and individuals – about the high cost of health insurance and the lack of access to needed health care. A statewide poll conducted in 2000 revealed that health care was of bigger concern than the environment, taxes, growth or crime. The poll results showed that 69 percent of respondents were very concerned about the cost of health insurance, placing that issue at the top of the list of concerns. The cost of medical care came in second, followed by prescription drug costs and the cost of caring for the elderly.

A survey of Maine small businesses also released in 2000 revealed that they too were concerned about the rising cost of providing health insurance to workers. Eighty-one percent of respondents indicated health insurance was important in their efforts to attract and retain employees. However, the number of small businesses offering insurance in Maine had declined. While more than three-quarters offered insurance to employees at some time during the three years prior to the survey, only two-thirds offered coverage at the time of the survey – even though the number of businesses indicating it was important to offer coverage as a matter of principle had risen.

Coming into the 121st session, legislators were prepared to take action to address Maine’s health care crisis. But they faced a significant roadblock – a billion-dollar budget shortfall. Like so many other states, Maine’s revenue shortfall is caused by the country’s shaky economy, reduced revenues as a result of tax cuts at both the state and federal level, and increased costs, especially in health care.

Given this situation, many wondered if it was really possible to move ahead and expand health care to more people. While factors contributing to high health care costs pose major challenges to reform in Maine, many legislators recognized that continued increases in the cost of health care could not be sustained over time. With no relief expected from the federal government to help the uninsured, and strong support from many in the business, labor and health care communities, Maine legislators moved forward to provide health coverage to all of Maine’s uninsured over time.

Legislation creating Dirigo Health was passed by a vote of more than two-thirds of members of both the House and the Senate. The Dirigo Health Reform Act, Public Law 469, was signed by the governor in May 2003. Initial steps are currently under way to implement the plan so it can be fully operational by late summer or early fall of 2004.

In the long run, Dirigo Health is designed to rely not only on employer-employee premiums for financing but also on savings that are expected to accrue to Maine’s health care system by reducing the amount of health care currently provided to the uninsured. It also includes voluntary employer contributions that will help draw down federal funds to provide subsidies for low-income workers and reduce overall premium costs for small businesses.

The primary objective of Dirigo Health over the first six months of 2004 has been to develop a benefit plan to be put out to bid and made available through the private insurance market. The plan will offer a competitively priced, comprehensive benefit package for small businesses and self-employed individuals. Subsidies will be available to households with incomes under 300 percent of the federal poverty level. Ensuring a balance between affordability and benefits will be critical to the success of Dirigo Health.

Health care providers participating in Dirigo Health will be reimbursed the same rates paid by private insurers – services often previously provided without any reimbursement when many of the uninsured required care under Maine’s mandatory “charity care” provisions. Ideally, Dirigo Health will provide more financial stability to Maine’s health care industry, and providers will send fewer patients to collection agencies. It does not try to accomplish too much, too quickly, allowing time to plan before expanding to larger businesses.

By covering the uninsured, Dirigo Health will reduce bad debt and charity care costs. However, instead of allowing insurance companies to collect a windfall in additional revenues from these savings, Dirigo Health identifies a portion of the money saved – no more than 4 percent of the cost of each policy – and uses it to help fund health insurance costs for businesses and individuals. The insurance industry and businesses were heavily involved in negotiating these terms, which clearly spell out that no payment from insurers will be required unless savings are clearly recognized. In this way, policy holders are protected from pass-throughs by the insurance industry.

Ultimately the success of Dirigo Health depends on the good-faith commitment of many individual stakeholders to act in the best interests of Maine’s citizens. We believe there is early evidence of this commitment. Insurance rates, for example, while still increasing, are increasing at much smaller percentages than in the previous three years.

Where most policy holders were seeing annual increases in the 15 to 30 percent range or even higher, rate increases requested recently remain in the single digits. As a result, a number of businesses have reported that they have been able to avoid passing along any additional costs to employees this year. This is a positive signal that we hope reflects the good-faith commitment of insurers to the success of Dirigo Health.

This commentary was written by Sharon Anglin Treat, the Senate Majority Leader; Michael Brennan, a state senator from Portland and the chair of the Joint Select Committee on Health Care Reform; and Ann Woloson, special assistant for the Senate Majority Office. It was excerpted from the current issue of the Maine Policy Review published by the Margaret Chase Smith Center for Public Policy at the University of Maine. The entire article can be read at http://www.umaine.edu/mcsc/mpr.htm