Good news came recently in the form of an actuarial report.
Actuaries are the bean-counters for the insurance industry. They analyze statistics, crunch numbers and predict risk and rates.
Gorman Actuarial, an independent firm based in Massachusetts, wrote the report at the request of Maine’s Bureau of Insurance. The analysis was done to forecast the impact of Public Law 90 on Maine’s health insurance market. The predictions are very encouraging.
PL 90 is the statute based on the health insurance reform bill, LD 1333, which passed the Legislature in May with bipartisan support.
For years, Maine has had some of the country’s highest health insurance rates. A chart of premiums over the last 30 years shows a distinct “hockey stick” angle upwards around 1993. That is when the draconian laws regulating guaranteed issue and community rating took effect.
Maine’s “community rating” law requires all premiums to vary only a small amount, regardless of the policy holder’s age and other health factors. This system subsidizes older people with artificially high premiums paid by younger and usually healthier people.
Healthy young people and families drop out of the market because they can’t afford the high premiums. The result is called adverse selection, leading to a “death spiral.”
Additional regulations seemed to make the situation worse, and prices continued to rise. In 2003, the Dirigo Health program started. Dirigo Health was funded by a tax on insurance companies, which was passed on to consumers. Even the premiums for this subsidized product were high, and ultimately the program spent hundreds of millions of dollars but failed to come even remotely close to its goals. It is now being phased out.
The result of all of these market experiments — other than Maine’s astronomically high rates — was that several insurers stopped doing business here and many people stopped carrying insurance altogether. The number of people in the private market plummeted, while the number of those on medical welfare (MaineCare) boomed.
Enter the new Legislature, which had Republican majorities in both houses for the first time in decades.
After years of watching from the sidelines and offering common-sense ideas, such as many used in other states, we now had our chance at health insurance reform. The result was PL 90.
PL 90 widens community rating bands so premiums will be based more on risk and young people can get a discount. It will allow the purchase of out-of-state insurance beginning in 2014. And it allows businesses to group together to form association captive insurance companies to self-insure.
PL 90 also creates the Guaranteed Access Plan (GAP), funded by a monthly fee of up to $4 on each private insurance policy. The GAP subsidies make sure that no matter how sick a person gets, that person still will have coverage, paying the same rate as a healthy person.
Based on these reforms, much of the Gorman Actuarial report was positive. Some findings include:
* The individual market reinsurance program created by PL 90 may reduce individual market premiums 12 percent to 15 percent.
* In PL 90’s first year of operation, approximately 80 percent of the individual market will experience lower premiums than they would have had in the absence of PL 90.
* PL 90 reduces premiums by more than 20 percent for 30 percent of the market. Without the GAP, about two-thirds of the market would receive higher premiums.
* PL 90 accelerates growth in the individual market. Enrollment may grow 6 percent to 10 percent before 2014 because of lower premiums. Moreover, since these market entrants most likely will be younger and healthier, they could reduce premiums across the board by 3 percent to 5 percent.
There also is good news in the small group market for companies with fewer than 50 employees. In the first year alone, 84 percent of the members in this insurance market should benefit.
Maine has never before seen these kinds of positive forecasts about our insurance market.
Not everyone will see benefits immediately, and some people may see increases. That, however, is nothing new. According to the Bureau of Insurance website, Maine’s average yearly rate of increase in the small group market over the last 10 years has been around 19 percent. In the individual market, the average increase has been 13 percent.
PL 90 has only started to take effect. The law is phased in over a period of years, and we will conform to the federal Affordable Care Act by 2014.
Maine is at the beginning of this health insurance transformation, but early indications show that this reform is just what we needed — relief for Maine residents in a very critical area.
Rep. Susan Morissette, R-Winslow, serves on the Insurance and Financial Services Committee and the Criminal Justice and Public Safety Committee