AUGUSTA – Lawmakers, state officials and lobbyists staked out positions Wednesday on the complicated piece of legislation Gov. John Baldacci has dubbed “Dirigo 2.0.” The bill would make adjustments to the contentious DirigoChoice insurance program – enacted in the governor’s first term to provide affordable health coverage to low-income Mainers -and proposes a number of changes to the way commercial health insurance is regulated in Maine.

LD 1890 proposes a new surcharge on hospital bills as a way to fund DirigoChoice, a measure that promises to be fully as controversial as the current “savings offset payment” collected from insurance companies. The Maine Hospital Association lined up against the bill.

The legislation also contains a “shared responsibility” provision requiring Maine employers to offer health insurance to their workers and every Maine resident to have some form of health coverage. Those who don’t would pay into a fund to help subsidize insurance for other Mainers.

The bill also contains a number of changes to Maine’s health insurance regulations, including setting up a reinsurance plan to help support the expense of high-cost patients, giving insurers greater latitude in adjusting their premiums for certain populations and allowing them to encourage their policyholders to travel greater distances for care.

If passed, the bill would require insurers to give discounts to nonsmokers and to people who take part in workplace wellness programs. It would make all premium rate increase requests public information, along with the actuarial data supporting those requests.

All in all, the governor’s legislation contains something for just about everyone to dislike, though most who testified also found elements to praise.

Even some of Dirigo’s most ardent supporters broke ranks at Wednesday’s public hearing before the Legislature’s Insurance and Financial Services Committee and criticized officials for making too many concessions to the insurance industry.

Joe Ditre, executive director of Consumers for Affordable Health, told the committee he had “serious concerns” about the bill. Ditre’s organization has been closely involved with the crafting of the Dirigo Health reforms.

“As drafted, this bill does not contain needed cost containment provisions and does not adequately fund [DirigoChoice]. In short, this bill does not move us in the direction of universal health care coverage. In addition, all of the funding mechanisms proposed in the bill are passed on to consumers through higher rates or taxes without any counterefforts to control rising health care costs,” Ditre said.

Perhaps the most contentious element of the bill is the proposed surcharge on hospital bills that would take the place of the savings offset payment. The money collected through this fee would be paid to the Dirigo Health Agency and used to help fund income-based subsidies for Mainers buying health insurance. The structure and amount of the new assessment, along with several other regulatory guidelines, would be set by the Dirigo Health Agency board.

Bruce Garrity, representing the self-insured Maine Automobile Dealers Association, noted that a number of lawsuits and complaints have been filed against the Dirigo agency and urged committee members to retain oversight of the agency and its board.

“This is not the time to say we’re going to abdicate all authority to the board,” Garrity said.

The new hospital fee would be charged to any insurance company or individual who pays a hospital bill. There is no provision to keep insurers from passing the cost of this extra charge on to their policyholders in the form of increased premiums.

“If this is such an important program,” Garrity told the committee, the Dirigo agency “should pay for it out of the General Fund.”

Like most others who testified, Garrity favored the subsidy funding mechanism proposed by a special Blue Ribbon Commission appointed by Baldacci last year. It recommended beefing up the state’s General Fund by implementing “sin taxes” on alcohol, cigarettes, soft drinks and snacks to raise the money needed for Dirigo. That recommendation never got off the ground, though, since Baldacci’s budget bill already included a new tobacco tax to help cover costs.

Katie Fullam Harris of Anthem Blue Cross and Blue Shield said requiring insurers to disclose their financial data when making rate filings “would be akin to making public the formulas for Pepsi and Coke; there would be no public benefit derived from this provision and, instead, a great deal of market disruption.”

“While we have major concerns about several provisions, including anti-competitive ‘transparency’ language,” Harris said, Anthem supports the “principles” behind the bill.

Dr. Robert McAfee of Portland, board chairman of the Dirigo Health Agency, applauded the governor’s bill and urged the committee to speed its enactment. Meaningful health reform has proved more complicated and difficult than some had expected, he acknowledged, but the challenges to Dirigo should not eclipse the program’s successes. With a current enrollment of about 14,500 people in more than 700 small businesses across the state, DirigoChoice is providing high-quality, affordable health coverage to some of Maine’s lowest-income families, he said.

“The people who rely today on DirigoChoice need a secure funding source to know their health care will be there for them,” he said. “More importantly, the Dirigo Health Agency needs the opportunity … to refocus the program on new and efficient means to reach and cover the un- and underinsured and to find the most cost-effective ways to deliver this product.”

Attached to McAfee’s written testimony was a list of 589 Maine towns where plan members live.

“With this bill, the governor seeks to learn the lessons from our experiences and move forward together to achieve universal coverage for all Maine citizens over time,” McAfee said.

A work session on LD 1890 is scheduled for 3 p.m. Tuesday, May 22, in Room 427 of the State House.

The Associated Press contributed to this report.