Winxnet, a growing information technology company in Portland, is enjoying an 18 percent drop in health insurance premiums after years of painful double-digit increases. Surprised managers even double-checked all the numbers to make sure the good news was true.

At the same time, Mid-Maine Restoration Inc., a small Edgecomb-based company that restores church steeples, got clobbered with a 35 percent increase in its insurance bill for next year — 10 times the increase it got a year ago. The stunned owners quickly shopped around for a better deal, but didn’t find one.

The companies, for better and worse, are feeling the effects of a shift that is just beginning to take place in Maine’s health insurance market. The first phase of a new state health reform law took effect in October, and it is expected to shake up health insurance premiums for thousands of small businesses.

Public Law 90 was passed in May and will be phased in gradually over the next several years. It will eventually allow businesses to shop for out-of-state plans and will impose a $4 fee on all Maine policyholders to help cover the cost of high-risk individual policies, among other things.

The first phase of the new law took effect Oct. 1 and loosens the rules on insurance carriers that sell coverage to thousands of Maine companies with fewer than 50 workers — the so-called small group market. About 100,000 Mainers are covered by small-group plans.

In effect, insurers can now raise rates higher for companies with older workers or those located in rural, high-cost health markets, and lower them further for younger, urban companies that tend to be less costly. Maine law used to have tighter limits on such variations to help keep down premiums on the high-cost end.

The range of variations will expand further over the next four years, but the initial change is having an effect on companies now renewing insurance policies, experts say. And the business community is watching closely.

“A lot of people are looking for information. What does it mean? What can we expect?” said Peter Gore, lobbyist for the Maine State Chamber of Commerce.

Gore generally recommends patience because the market won’t respond overnight, he said. “For a full understanding of the impact of PL90, it’s going to take time,” he said.

Small group insurance also is notoriously complex, and premiums can swing based on a long list of other factors, including the number and health status of workers.

Already, however, patterns are emerging in the market that are encouraging to some and worrying to others. Essentially, the new law is helping push up premiums for some rural businesses with older workers, and slowing increases — or causing decreases — for younger, more urban companies, according to preliminary numbers and anecdotal information.

Maine’s Bureau of Insurance compared the renewal quotes sent to 734 small businesses in October to those sent out during the same month last year. Overall, more companies — about 9 pecent — saw an actual decrease in premiums this year than last. At the same time, however, a slightly larger number of companies also saw hefty increases of 60 percent or 80 percent.

The preliminary state data also suggest a geographical pattern: the biggest winners are in southern Maine and the biggest losers are in northern Maine. Most of the businesses in York and Cumberland counties saw premiums drop or rise less than 20 percent. Most of the businesses in Aroostook, Penobscot and Piscataquis counties, on the other hand, saw increases of more than 20 percent.

Winxnet is an example of a company that appears to be benefiting from the change.

The tech company has a large staff of about 45 healthy workers in their 20s and 30s based in downtown Portland, home of the most accessible and competitive health care services in the state.

Christopher Claudio, chief executive officer, said he’s confident the new law is at least partly responsible for the unexpected drop in the company’s premium for 2012. The 18 percent reduction was based on the same coverage as last year, although the company got a futher reduction in its premium when it moved a small group of workers to a less costly coverage option, he said.

“Prior to this, I don’t remember us ever not having a double-digit increase,” Claudio said. “We’re a young company. We’re a healthy company. But we were grouped into plans often with the older” companies.

Claudio said the new premium will save nearly $40,000 this year. As a result, the company will increase the share it pays of employee health insurance premiums from 75 percent to 80 percent, which means workers will have less money taken out of their paychecks. There also will be more money for a Christmas party and for bonuses, he said.

“We’re able to put more money into their pockets,” he said. “Last year it just went into the ether.”

Mid-Maine Restoration wasn’t so fortunate.

The five-employee company saw just a 3 percent increase last year — before the new state law was passed. It was the smallest increase in years and it allowed the business to continue health coverage for its five employees despite the slowdown in the construction industry, said Lisa McSwain, who co-owns the business with her husband.

The company’s three steeplejacks are in their 20s, she said. But she and her husband are in their mid-50s. The business is in a rural area, though access to hospitals and health care seems good to McSwain, she said.

The insurance quote McSwain got in November was about 35 pecent higher, despite having the same, healthy staff as last year. It would have cost an additional $6,684 for the year — if the company could afford to pay it.

“We can’t absorb it, obviously,” she said. “We’re a construction company in a recession. Even the fact we’ve stayed in business has been miraculous.”

McSwain and her husband decided to keep providing insurance, but they increased the deductible for each individual from $2,500 a year to $4,500. The policy will only cover medical expenses after the deductible is paid. In return, the company’s premium will stay about the same.

McSwain is frustrated with the health care industry, and now also with the new law. “It’s supposed to help the bottom line, but it’s really screwing us.”

The impacts of the new law aren’t unexpected. Overall, it was intended to deregulate Maine’s insurance market, increase competition among carriers and draw young people into the coverage pool by making it more affordable.

The Maine State Chamber of Commerce remained neutral on the proposed law because of uncertainty abut the impacts, while the Maine Small Business Coalition opposed it, saying it could shift costs to rural businesses that can’t afford it. Nate Libby, the coalition’s executive director, said those fears appear to be coming true.

Libby said he’s been hearing about big jumps in premiums in both northern and southern Maine. Companies in both Skowhegan and Bath reported 60 percent increases, for example, and a Sanford company’s premium went up 75 percent, he said.

A law firm in Portland even saw a 60 percent increase, apparently because of the age factor, and complained that it was being penalized for being the kind of company that retains longtime, loyal workers, Libby said.

The large increases are enough to push some companies to drop insurance, he said. “I’ve had a couple of folks said they are just giving up altogether.”

Joe Ditre, director of Consumers for Affordable Health Care, said there will ultimately be more losers than winners in the new market. Ditre said he doesn’t believe young healthy workers will flood into the market and bring insurance costs down. Instead, he said, the costs of insurance will shift and older, rural businesses will stop buying insurance.

“The promise of this lowering health care costs in the small group market overall is not happening,” he said.

Joel Allumbaugh, a health insurance agent and a policy analyst for the Maine Heritage Policy Center, said he is encouraged by the emerging numbers.

It will take time for a deregulated market to pull in younger people who can’t afford coverage now, he said. And eventually, by spreading the risk, that will help bring down insurance costs for older people, too.

The fact that more businesses are actually seeing premiums decreasing means it is already starting to work, he said.

“I wasn’t seeing this amount of decreases in the past,” he said. “If someone had asked me before, ‘Would we see a lot of decreases as early as October?’ I would have said. ‘No, that’s too soon.’ I think it’s incredibly promising.”

 

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