Dirigo Health votes to collect $34.3M offset

At their last meeting of the year, the directors of the Dirigo Health Agency voted Thursday to proceed with collecting the controversial $34.3 million savings offset payment from Maine insurance companies. The money is needed to assure the continued viability of the agency’s subsidized DirigoChoice health insurance product while funding alternatives are considered by the Legislature.

Under state law, the amount of the savings offset payment, or SOP, is calculated each year by determining savings attributable to health care cost-containment measures included in Gov. John Baldacci’s multifaceted Dirigo Health reforms.

These measures include expanding insurance coverage, improving the quality of care and holding down hospital spending and profits.

A portion of the savings is collected from insurance companies and self-insured groups, then used to pay for premium subsidies that make the DirigoChoice insurance more affordable to lower- and middle-income Mainers.

A lawsuit contesting the legality of the SOP process was filed last year by insurers and the Maine State Chamber of Commerce. The case is pending in Maine Superior Court, but insurers have been required to pay the 2005 SOP while the outcome of the case is determined.

Gov. Baldacci suspended the collection of the SOP for 2006 while a special commission studied funding alternatives. The group made its recommendations this week, homing in on the state’s general fund to pay for the Dirigo subsidies through targeted tax increases.

Board chairman Dr. Robert McAfee said Friday that lawmakers will consider those tax increases or other funding sources during the coming session.

“But that will take time, and we still have to run an insurance agency,” McAfee said. The Dirigo program has enough money to stay in business through the end of March 2007, he said, in large part because of the quarterly payments of last year’s SOP now being made by insurers.

If the board had not voted by Dec. 31 to begin collecting this year’s SOP, it might have forfeited the $34.3 million altogether, leaving the Dirigo program without operating revenues after April 1. Any funds collected from this year’s SOP may be returned to insurers if other funding is established by the Legislature, McAfee said.

The board also voted to authorize agency staff to stop enrolling new policyholders as of April 1 if funding is problematic, McAfee said. “We’re trying to cover all our bases,” he added.

Insurers continue to have “serious reservations” about the SOP, according to Mark Ishkanian, spokesman for Anthem Blue Cross and Blue Shield of Maine, the state’s largest insurance company. He would not speculate on whether the industry would mount another legal challenge. Ishkanian also would not comment on whether Anthem policyholders should expect another increase in their premiums as a result of the board’s vote, saying the company needs more time to study the decision.

Insurers have been granted authority by the state’s insurance bureau to pass on the cost of the SOP to their policyholders instead of paying it out of their profits, as Dirigo architects and the governor intended. This “pass-through” provision has angered many businesses and consumers whose premiums have increased as a result.

Dirigo Health Agency board member Dana Connors, president of the Maine State Chamber of Commerce, has been an outspoken critic of the SOP because of its impact on businesses and self-insured groups. Connors was out of state this week and could not be reached for comment by the end of the day Friday.