Dirigo health plan a disappointment

Gov. John Baldacci projected that by this month 6,600 employees at small businesses would enroll in his DirigoChoice health plan. To date, a dramatically smaller 600 actually have signed up. By the end of 2005, the administration committed that 31,000 would enroll in DirigoChoice, including 26,600 small business employees and 4,400 self-employed and other individuals.

DirigoChoice is the signature element of the governor’s Dirigo Health initiative. It is a government-designed, Anthem-provided health insurance plan targeted to small businesses and the self-employed with those at various income levels receiving taxpayer-financed premium subsidies.

Yet, why are small businesses rejecting this government solution to their health care woes? Why does the flowery political rhetoric about DirigoChoice calling it “innovative, visionary, comprehensive and affordable” not match the public’s lackluster reaction?

DirigoChoice is the premier example of what happens when well-intentioned bureaucrats design an insurance product for a group that they totally don’t understand – small businesses. Certainly, Maine small businesses are familiar with Augusta’s skill at taxing and overregulating them, so they may be suspect of this new we’re-here-from-the-state-and-we-want-to-help attitude. Here are just four of the reasons why small businesses are rejecting DirigoChoice.

DirigoChoice is still expensive for small businesses. Small businesses vary greatly in their financial health and ability to offer and pay for health insurance for their employees. Rather than recognize this, the Dirigo bureaucrats mandated that all businesses must pay 60 percent of the employee-only premium for all their employees, about $2,230 a year. Since DirigoChoice was originally targeted to small businesses with no health benefits, it seems delusional to expect that now those same businesses can magically afford $2,230 a year per employee in increased payroll costs.

Why not be flexible? If one small employer can afford $2,230 a year and another can only afford $1,900 a year, why only allow the first one to have DirigoChoice? Flexibility is key to reaching small businesses. DirigoChoice is inflexible.

DirigoChoice is six times more complex to administer than traditional health insurance. Under traditional health insurance, employees choose plans based on number of people covered: employee only; employee and spouse, employee and child(ren) or family coverage. With DirigoChoice, each one of these four levels of coverage has six different plans depending on an employee’s household income. And each of these 24 total different plans has a different net employee premium and deductible attached to it.

A health benefit is complex enough to administer. Now small businesses, especially those not previously providing health benefits, are expected to administer and troubleshoot 24 different health plans for their employees. And these plans vary based on information that the employers don’t have (or likely want to know) – the household income of their employees. Simplicity is key to reaching small businesses. DirigoChoice is the most complex health plan on the market.

Employees must provide significant confidential information to the state to apply for premium subsidies. If an employee wants to apply for a premium subsidy as part of DirigoChoice, he or she must reveal extensive personal information beyond just household income. In an effort to put as many people on Medicaid as possible, the state requires that DirigoChoice participants requesting a subsidy reveal the following about every member of their household: pregnancy status, income and earnings, child care providers and expenses, disability or HIV status, all cashable assets (including names on accounts, financial institution and account number), and all real estate assets.

As one can imagine, employees may be reluctant to reveal such information to the state. And employers are in a difficult position of helping their employers provide information to the state that is illegal for them as employers to know. Again, DirigoChoice violates the simplicity rule.

What employees will pay for DirigoChoice varies dramatically based on household income. Legislators lament the Medicaid cliff where someone is not eligible if making $1 over the limit. Under DirigoChoice there are 24 different cliffs for employees to fall off. For families the cliff effect is dramatic. A family of four with a household income of $28,000 will pay a net premium of $1,788 for a $500 family deductible plan. Yet a similar family earning $29,000 a year will pay $3,564 for a $1,000 deductible plan. Here the $1,000 increase in earnings results in $2,276 in higher costs ($1,776 more in premiums plus $500 more in deductible). Here DirigoChoice violates the fairness, simplicity and flexibility rules.

Small employers are rejecting DirigoChoice because it is fundamentally flawed. While touted as the silver bullet to Maine’s health care woes, it is revealed as just another empty promise from Augusta. Unfortunately, while the governor and others cling to Dirigo, Maine people must wait longer for meaningful health care reform.

Tarren Bragdon is the director of Health Reform Initiatives at the Maine Heritage Policy Center. He authors the quarterly DirigoWatch report, available at www.MainePolicy.org and can be reached at tbragdon@mainepolicy.org