AUGUSTA – A state supreme court decision upholding what has been a key funding mechanism in Gov. John Baldacci’s Dirigo health initiative was a victory for working families and small businesses, Baldacci said after Thursday’s ruling.

Baldacci said he hopes the ruling will “put an end to all these lawsuits and all the parties can get back to the original intent of Dirigo health.”

Other supporters said the ruling gives encouragement to those who want to expand a program designed to move Maine closer to universal health care.

In a 5-1 ruling, the court sided with the Baldacci administration on one of the most contentious elements of Dirigo – savings offset payments – assessments made to insurers based on savings created by the program.

Former Insurance Superintendent Alessandro Iuppa found that Dirigo produced $44 million in savings in its first year.

Writing for the majority, Chief Justice Leigh Saufley acknowledged that the statute was vague on “aggregate measurable cost savings” and gave deference to Iuppa’s “reasonable interpretation of an ambiguous statute.”

Justice Donald Alexander, the lone dissenter, said the insurance superintendent needed specific criteria for coming up with the disputed number.

“Reasonable people do differ, and differ geometrically, in guessing at the meaning of the ‘cost savings’ provision. And the statute provides no guidance as to how these differences may be resolved,” Alexander wrote.

State Rep. Sharon Anglin Treat, a Farmingdale Democrat who helped push for passage of legislation that created Dirigo in 2003, said the decision “validates the system we have in place and it gives us a great deal of encouragement and hope that in moving forward we can continue to expand this program.”

Another supporter, Joe Ditre of Consumers for Affordable Health Care, said the decision “is a validation that the program works.”

Baldacci, saying he was “very pleased” with the court ruling, said, “We think this is a victory for Maine people, Maine working families and small businesses.”

Maine’s Dirigo Health Reform Act is designed to contain health care costs and expand health coverage to the 130,000 Mainers who lack insurance.

The cost savings component to be passed on to insurers was supposed to be based on reduced charity care and bad debt under the Dirigo program.

But the Maine Association of Health Plans and two other groups sued over the $44 million figure, telling the Supreme Judicial Court that the Dirigo panel included additional categories of savings not envisioned by state lawmakers.

The state argued that the Dirigo Board and Iuppa had the expertise to interpret and apply the state law. The supreme court’s majority upheld a Superior Court judge’s ruling that gave deference to the Iuppa and the board.

Trish Riley, the governor’s top health adviser, said the cost savings concept that’s in dispute will likely be altered by the Legislature this session. But that still leaves two years of figures in dispute.

A Baldacci administration proposal before the Legislature envisions a one-year continuation of savings offset payments before a conversion to a surcharge placed on hospital bills. Additionally, a tax on insurance plans would be extended to health maintenance organizations to fund the program.

The proposed Dirigo reforms are being reviewed by the Insurance and Financial Services Committee, whose chairman said Thursday’s ruling shows that Dirigo “is saving money and expanding access.”

“This ruling gives a green light to any state that is serious about tackling the health care crisis,” added Rep. John Brautigam, D-Falmouth.

Differences in interpretation of the Legislature’s intention on the savings offset led the original proponents to propose a $2.7 million offset.

The five-member Dirigo board appointed by Baldacci then came up with a figure of $136.8 million before it was reduced by Iuppa to $43.7 million.