Dirigo bill proposes tax hike on tobacco

AUGUSTA – As Gov. John Baldacci updated his budget adjustment plans with a new package of transfers and cutbacks that contains no new taxes, lawmakers began gearing up for a hearing next week on a bill to bolster Maine’s troubled Dirigo Health programs that relies on a set of tobacco tax hikes.

Backers are “trying to find some middle ground on market reform … and its funding for Dirigo,” said the sponsor, House Majority Leader Hannah Pingree, D-North Haven.

The measure would repeal a controversial savings offset payment that targets insurers and replace it with a health access surcharge of 1.8 percent on paid claims.

The bill also would increase the tax on cigarettes from $2 to $2.50 a pack and adjust levies on other tobacco products.

Additionally, the bill would establish a reinsurance association for the individual health insurance market without placing individuals in a separate risk association.

Advocates say the Act to Continue Maine’s Leadership in Covering the Uninsured could allow the Dirigo program to reopen enrollment and also make coverage in the individual market more affordable.

Senate Minority Leader Carol Weston, R-Montville, one of many Republicans who criticize the Dirigo program as too costly and who favor a more purely market-oriented approach to making health insurance more affordable, said she thinks market reform should be decoupled from Dirigo funding.

“I think if we could do that, you would see something pass,” Weston said.

The Pingree bill also would allow insurance carriers to test new products designed for younger people in the individual market.

The Dirigo measure is to be reviewed by the Legislature’s Insurance and Financial Services Committee.

Pingree pegged the number of participants in the Dirigo program now at about 15,000.

She said the insurance industry might not be enthusiastic about the new bill but that “it’s a middle ground, and I think they’ll recognize that.”