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Adam Thompson on January 4, 2007 - 10:28am
Two years into Maine's DirigoChoice insurance program, designed to expand access to health insurance to Maine's uninsured individuals and small businesses, the state is grappling with how to fund the program. While the program's governing board recently voted to assess a controversial assessment paid by insurers and self-insured companies, a separate Governor's Blue Ribbon Commission has proposed alternative funding that relieves insurers of their responsibility to help fund the program. Instead of keeping insurers, hospitals, and large businesses at the table through "pay or play" or "fair share" initiatives and enhanced cost containment, the Commission wants to replace the insurer assessment with general fund revenue raised on the backs of consumers.
Letting Insurance Companies Off the Hook: At issue is how or whether to replace the controversial Savings Offset Payment (SOP), an assessment paid by insurers and companies that self-insure. As described in a report by Mercer Consulting, the assessment encourages cost containment because the amount of the assessment is offset by savings in Maine's health care system. The state's insurance industry lobby and State Chamber of Commerce have sued to stop the assessment. Although those suits have so far failed in court, Governor John Baldacci charged the Blue Ribbon Commission to identify alternative funding for the DirigoChoice program in order to get beyond the controversy.
The final report has not been issued, but the Commission recently approved a patchwork of proposals that lets the very profitable insurance industry off the hook and relies primarily on increased "sin" taxes to fund the Dirigo program. A raise in the cigarette tax from $2.00 to $2.50 and taxes on snacks, bottled soft drinks and syrups, and beer and wine would provide the majority of funds needed to sustain the program. While raising cigarette taxes has proven effective at reducing smoking rates, letting insurers off the hook by replacing the assessment with general fund revenue that is raised on the backs of consumers is not a policy goal we can support.
While the Savings Offset Payment is not a perfect solution, it requires the insurance industry, the state's largest companies, and the hospital community to remain at the table and it encourages cost containment, which is vital to sustainable health reform. The decision by the Dirigo Health Board of Directors to levy the 2007 assessment is a welcome development. It will ensure continued funding for the Dirigo program in the event the legislature fails to act on alternative funding. And, it encourages those who do not support the assessment to work hard for a viable alternative that can be supported by progressive legislators, who could prevent any legislative action that would relieve insurers of their responsibility to be part of the solution.
Employer vs. Individual Responsibility: In addition to the funding question, the Commission has made several important proposals to improve access to insurance. These include allowing individuals to purchase insurance pre-tax and requiring insurers to cover dependents up to age 30, which would help address the high uninsured rates among "young invincibles." However, of mixed concern to consumer advocates, the Commission endorsed the concept of an employer and an individual mandate to purchase coverage. The mandate would be imposed on individuals with incomes above 400% of the federal poverty level and on employers with 10 or more employees. However, penalties for non-compliance would be much lighter on employers than for individuals - a dollar a day for each uninsured employee versus a fee paid by individuals equal to 50% of the cheapest DirigoChoice product multiplied by each month they were uninsured.
While a universal or single-payer system is preferable, Maine could strengthen and expand the Dirigo program by combining the insurer assessment with the revenue sources identified by the Commission. This keeps insurers at the table and increasing sin taxes has shown to help state's achieve important public health goals. Lastly, now would be a good time for Maine to enact and strengthen the employer mandate proposed by the Commission by establishing a more robust "fair share" fee for non-compliance - a significant fee that would constitute a real incentive for employers to provide coverage.