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Dirigo Not the Cure to Maine's Health Insurance Problems

When a child touches a hot stove, he discovers it hurts and learns not to do it again. Unfortunately, Maine's legislators and insurance regulators don't learn so quickly.

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In 1993, the Maine legislature imposed modified community rating (CR) and guaranteed issue (GI) mandates on the individual insurance market. The intent was to increase access to health insurance for the uninsured population, but the results were nearly the opposite. Since then, the state's elected officials and regulators have been groping for new regulations to fix the problems caused by the rules now on the books.

The 1993 reforms meant individual health insurance premiums were not permitted to vary by gender, health status, claims experience, or length of time with coverage, and insurers were required to issue coverage to any applicant who had resided in the state for at least 60 days. In order to cover higher expected claims costs insurers raised their rates, often to levels unaffordable to most Maine families.

By 2002, Democrats and Republicans alike agreed there was a major problem. The number of insurance companies serving the state's individual market fell by half and one company, Anthem, sold nine of every 10 individual insurance policies in the state. Individual insurance premiums rose to well above the national average, twice as high as rates in neighboring New Hampshire and three times as high as in similarly rural North Dakota.

The problem of affordable coverage was deemed so severe that John Baldacci made affordable health care one of his biggest campaign issues when running for governor.

In June 2003, Baldacci signed the Dirigo Health Reform Act. Many praised the initiative, which became effective in September of that year, as a bold effort to reform Maine's health insurance market. But instead of repealing the regulations that caused the crisis, Dirigo leaves the rules in place and adds a government-run, taxpayer-funded health insurance and medical care program.

The insurance component of the Dirigo health plan, DirigoChoice, is a voluntary program for Maine residents who do not have coverage. It will be available to uninsured Maine residents under age 65 whose income does not exceed 300 percent of the federal poverty level (about $55,000 for a family of four, $27,000 for an individual). The unemployed and self-employed will enroll in the plan as individuals with the benefit of heretofore unavailable group rates.

Baldacci announced on August 23 that Anthem Blue Cross and Blue Shield of Maine -- the insurer that already holds a near-monopoly on the individual insurance market in Maine -- will administer DirigoChoice. The governor said marketing would begin October 1.

DirigoChoice insurance will be available at monthly community-rated premiums as low as $260 for a single adult and $780 for a family of four. The state will subsidize deductibles, out-of-pocket maximums, and the monthly premiums incurred by DirigoChoice enrollees under 300 percent of Federal Poverty Level ($28,000 for a single adult and $56,500 for a family of four).

In the first year, the plan will be paid for with $53 million in tax dollars set aside by the legislature in 2003. In future years, the plan will be funded through a complex system of employer and employee payments, Medicaid cost-shifting, and a fee charged to insurers.

Experts say the plan won't work. The subsidized rates will drive remaining private insurers from the market, and rising demand for services will either bankrupt the program or force lawmakers to impose budget restrictions on hospitals and other care providers. Merrill Matthews, director of the Council for Affordable Health Insurance, predicts Mainers will be joining Canadians in heading south for quality health care--to New Hampshire.

"The governor and state legislature haven't learned a thing," says Matthews. "What they have done can only make the situation worse." "Maine is moving very fast toward government-run single-payer health insurance," adds Scott K. Fish, director of special projects for the Maine Public Policy Institute. "The revised Maine Rx program is part of that movement. Maine's Dirigo Health Plan is another part."

Burned by excess regulation for more than 10 years, Maine's legislators and regulators should have repealed the laws that caused the problem in the first place. Maine's health insurance consumers would benefit if only their elected leaders would learn from past mistakes.

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