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Recent articles and an editorial in the Bangor Daily News have discussed legislation proposed by the Bureau of Insurance, an agency within the Department of Professional and Financial Regulation. In addition, the release of the Report of the Year 2000 Blue Ribbon Commission on Health Care has heightened the focus on health care costs and health insurance.
It has been suggested that Maine should take a “wait and see” approach and await the results of the latest national plan to expand Medicaid and to provide tax credits to low income workers before making significant changes on its own. If Maine could be assured that these changes would pass, it might be a suggestion worth taking. The problem is, however, that passage of these proposals cannot be guaranteed and Maine cannot afford to wait.
There is little dispute that there are serious problems with Maine’s health insurance market. Maine’s health care costs are expected to climb from $4.7 billion last year to nearly $9 billion within the next decade. Many individuals and small businesses have experienced double digit rate hikes in their health insurance premiums over the past year. Currently, only three HMOs are offering policies statewide. And it is no wonder-HMOs in Maine have lost a combined $175 million over the last three years.
The goal of insurance – any insurance – is essentially to pool the risk and spread it among all insured people. The problem we face with health insurance is that, as the cost of insurance rises, younger and healthier people elect to drop their insurance. The risk is then distributed among a smaller and less healthy group of people-making it more expensive for those who need it most. Without expanding our insured population, health insurance costs will continue to climb at an alarming rate.
To respond to this situation, the Bureau of Insurance has prepared legislation that is designed to help mitigate rate increases, while hopefully stabilizing the health insurance market.
Recent editorials have misconstrued these efforts, however, and several aspects of the proposal need to be clarified.
A key provision in the proposal would allow insurance companies to increase rates for those who live unhealthy lifestyles – such as smokers. Maine’s community rating law currently permits an insurer to set a rate and have that rate deviate up to 20 percent based on age, smoking, geographic location and occupation. This, in effect, would permit an insurer to offer a lower rate to persons who do not smoke. While we acknowledge that this proposal would likely result in a cost increase for some individuals, it is a necessary step to attract healthier, lower risk individuals back into the market.
Critics of the bureau’s proposal state that Maine’s community rating laws should be strengthened, rather than relaxed, believing that by more evenly distributing the cost of health care, more people would buy health insurance and the cost of that insurance will be lower. Unfortunately, that has not proven to be the case. When compared to the laws of other states, Maine’s current community rating laws are among the most restrictive yet we have more people who can no longer afford to buy health insurance then ever before. In essence, those laws are not working in the way they were intended.
The proposal does not eliminate the mandated benefits that exist under current law. If approved, it would authorize the Superintendent of Insurance to approve, on a pilot or trial basis, policies that may be exempt from various provisions of the Insurance code. This authorization would be for a limited duration and would expire on October 1, 2004, unless extended by the Legislature and would require insurers to report on the impact of the law to both the Superintendent of Insurance and the Legislature.
Another proposed change would allow HMOs to stop offering individual plans if they so choose. Because most of these plans are so expensive – in part because they have to spread their costs to the participants -only about 1,500 Mainers have these plans. Rate increases in Maine for these individual plans have ranged from 30 to 64 percent over the past year and are becoming increasingly unaffordable.
The proposal also seeks to eliminate the requirement that health insurance carriers to offer standardized plans. This proposal has been criticized as eliminating choice. While the purpose of the requirement is to enable consumers to compare costs, in reality the products are too expensive for most people to purchase. A choice that is not realistic isn’t really a choice at all.
There are several other provisions of the billdesigned to stimulate innovation and additional products in the marketplace. The proposal does not signal a return to the time when health insurance could be denied based on the health of the insured. Current laws that protect continuity of coverage and that restrict exclusions based upon preexisting conditions would not be changed.
Critics, though, seem to have missed the big picture, the need to make Maine’s insurance market more viable.
Contrary to the assertions of some observers, the bureau’s proposal is not designed to increase profitability of insurers, but rather to ensure that health insurance continues to remain available and affordable in this State. The overall bill is intended to make Maine’s insurance market more viable and attract more people to purchase insurance so that costs can stabilize over the long term. Health insurance is only meaningful if that insurance is affordable and there are companies to offer it.
Finally, I would like to address one more issue: the recent departure of Alice Knapp as director of the bureau’s Consumer Health Care Division. Ms. Knapp was a valued employee of the Bureau and will be missed. While her resignation has been portrayed in the media as in protest over the bureau’s legislation, she never said this to me or to Superintendent Iuppa. She in fact expressed general concern with health care policy in the state subsequent to giving her resignation notice and indicated that she wanted to explore other professional avenues, including accepting a new employment opportunity and running for elected office. We wish her well in her future endeavors.
We do not pretend to have all the answers, nor do we believe that this is a situation for which there is a quick or easy fix, but we welcome the discussion that the proposal has generated.
S. Catherine Longley is commissioner of the Maine Department of Professional and Financial Regulation