AUGUSTA – A plan to allow insurers to increase the difference between what they charge the old and sick and what they charge the young and healthy was applauded by insurance and business representatives, while consumer advocates howled in protest at a public hearing Friday.

The plan was developed by Maine’s Bureau of Insurance to stave off what it sees as an eventual collapse of the individual insurance market in Maine.

“Failure to act could well result in a collapse of Maine’s individual health insurance market within five years,” said Alessandro Iuppa, superintendent of insurance.

The idea, Iuppa said, is that by allowing the young to pay less for health insurance than the old and sick, they would come back into the insurance pool. As a result, those being insured would, as a group, not be as old and sick. With a healthier pool of insured, premiums would grow more slowly, Iuppa said.

The current proposal would impose limits on when premiums could be adjusted to reflect an individual’s health status. Renewal rates with the same insurer wouldn’t allow for adjustments, according to the Bureau of Insurance.

“[The proposal] might help jump start our noncompetitive health insurance market by enticing other carriers into the market,” said Peter Gore, a representative of the Maine Chamber of Commerce.

Sharon Roberts, a vice president with Anthem Blue Cross and Blue Shield, which has a near monopoly on individual insurance policies in Maine, said the proposal will “improve access to health insurance in Maine and will help to stabilize the cost of health insurance in Maine.”

But Bob Philbrook, a member of the citizen’s advisory committee to the Bureau of Insurance and an advocate for low-income Mainers, said the bill is merely an attempt to help an industry last longer as it heads to disaster.

Poor and older people “are not going to be able to bear this kind of increase just to protect a dying industry,” Philbrook said. “You’re really talking about an industry that’s collapsing and maybe you ought to let it go.”

Others said the underlying premise of the bill is flawed.

The notion that a young person would be attracted back into the marketplace if he were to pay $8,000 a year instead of $8,500 isn’t plausible, said Christopher St. John, director of the Maine Center for Economic Policy.

Many speakers said the lion’s share of rate increases is caused by higher medical charges. Consequently, they argued, the proposed changes were another form of cost shifting.

John Marvin, representing the Maine Council of Senior Citizens, said the committee should study options.

“This legislation is of questionable benefit to consumers and poses the possibility of putting the oldest and least healthy at far greater risk of losing insurance,” Marvin said.

“As a young teacher in good health I knew and accepted the fact that money being paid in for insurance for me was partially going to subsidize older teachers,” he said.

Marvin, like several speakers, said the proposals reflect the Bureau of Insurance’s bias toward keeping the industry healthy over making consumer-friendly proposals.

Several speakers complained that using health status as a means of determining insurance rates was unfair and would discriminate against individuals with conditions like diabetes.

“Many of us have family members who are diabetics; we know they didn’t cause their [condition],” St. John said.

“To assume that we are [always] causing our own ill health doesn’t make sense,” he said.

Many opponents and proponents, however, were in agreement in supporting some features of the bill. Among them is a provision to authorize the superintendent of insurance to approve pilot insurance projects to create new, innovative products. Another would improve the way insurers advise policyholders about whether services described by doctors as “medically necessary” are actually covered.

The idea of charging smokers more for insurance also seemed to sit well with many who testified for and against the bill. They said smokers know they are putting themselves at greater risk for preventable illness and therefore ought to pay more.

The bill will go before the banking and insurance committee next week.