Insurance law promises more affordable coverage

By Rep. Joyce Fitzpatrick
    The health insurance reform bill that triggered such intense debate in the Legislature is now law. Governor LePage signed the measure on May 17 following votes in the House and Senate.
    The bill itself, LD 1333, should not have been a partisan issue. Similar legislation was proposed by Democratic Representative Don Pilon, of Saco, a couple of years ago. The new law is modeled on insurance practices being used successfully in other states to increase competition. If the system works here as it has worked in states with similar demographics, it will expand choice, reduce premiums and enable more young people to afford coverage.
    Businesses, moreover, will be able to band together to form larger insurance pools to keep costs in check. That change will begin 90 days after the Legislature adjourns. Small company tax credits for wellness programs will start at the same time. Beginning in 2014, insurance companies licensed in Massachusetts, New Hampshire, Connecticut and Rhode Island will be able to offer policies for sale in Maine. We believe this part of the plan will generate stronger competition, lower pricing and a much broader assortment of policies to meet a variety of budgets.
    Unfortunately, the debate on the House floor and in the news media was frequently marked by misinformation, distortion and exaggeration, leaving many Maine residents confused. Let’s try to clear up some of the misconceptions.
• Opponents of reform argued that this law would force people in rural areas to travel outside their region to receive medical care. That is not true. The new law repeals Rule 850, which prevented insurance companies from giving financial incentives to consumers who sought less expensive care outside of their immediate area.
    For example, if you needed a procedure costing $20,000 in Aroostook County, but only $12,000 in Bangor, your insurance company could offer you an incentive to travel to Bangor. They might pay for your mileage or reduce your deductible, making it financially advantageous for both parties. However, if you preferred, you could still get the work done in Aroostook County.
    State workers, legislators and community college employees have been exempt from Rule 850 since 2005, generating significant savings to their own insurance plans. The rule set up unfair and anti-consumer restrictions on rural Mainers, and its repeal will give everyone the same options enjoyed by legislators and state employees.
• Opponents claimed that the reform would increase premiums for older people. Again, not true. This law conforms to the age-based pricing standards in the Affordable Care Act (ACA), better known as “ObamaCare.” It allows insurance carriers to offer less expensive products to younger people. The idea is to lower costs for them, not raise costs for older residents. Offering more competitively priced policies to younger, healthier Mainers will spread risk to a larger group of people, thus holding down premiums across the board.
• Opponents argued that the bill would allow insurance companies to deny coverage to people with pre-existing conditions. This would be a deal-breaker if true, but it’s not. The new law maintains current law that makes it illegal for insurance carriers to deny coverage to anyone. Maine laws on “guaranteed issue” and “guaranteed renewal” remain in place, and no insurer can cancel your policy if you get sick.
• In arguing against LD 1333, critics said it would create a “high-risk” pool that would stigmatize people with chronic, expensive medical needs. The new law establishes a reinsurance plan. In a high-risk pool, people prone to higher claims are separated from the rest of the market, thus reducing costs for healthy people while increasing the cost for the chronically ill. The reinsurance plan, by contrast, subsidizes the claims of the chronically ill and requires that they be charged the same amount for the same plans as those who are healthy.
• The reinsurance plan will be funded by a monthly assessment of up to $4 on private insurance policies. Critics attacked this assessment as a tax, but in fact this modest amount will be more than offset by phasing out the $40 million Dirigo Choice assessment, which imposes a 2.14 percent tax on paid insurance claims. Between the drawdown of the Dirigo assessment and the premium decreases resulting from other provisions of the law, Mainers will end up with lower monthly premiums.
    It is clear to everyone that Maine’s insurance system isn’t working. The costs are among the highest in the nation, and some 130,000 state residents have no coverage, usually because of the exorbitant expense. The new system is designed to bring our insurance market into the American mainstream, with likely significant benefits to Maine’s overall economic health.
    State Rep. Joyce Fitzpatrick (R-Houlton), a retired insurance executive, serves on the Insurance and Financial Services Committee.