An experiment to help small Maine companies pool their resources to better control health insurance costs is ending at the end of this year.

MaineSense, an employer-owned health insurance nonprofit, is winding down and will close on Dec. 31, according to Joe Edwards, president of the Maine Wellness Association, which created the program.

MaineSense was plagued by a high claim frequency that wasn’t sustainable, according to Edwards, a former superintendent of Maine’s Bureau of Insurance.

“We had much higher frequency and larger claims than we could have predicted,” Edwards said.

When it was created in 2011, MaineSense was the nation’s first group health insurance captive, according to Eric Cioppa, superintendent of Maine’s Bureau of Insurance. A captive is an insurance company that operates like a co-op to cover the risks of a group of employers. While captive insurance companies are common with other types of insurance, such as general liability and workers’ compensation, it’s not a typical model for health insurance.

Edwards declined to provide any more on-the-record comments about MaineSense or its members.


Although Maine’s Bureau of Insurance regulates MaineSense, Cioppa said any information about the nonprofit, including the number of member companies or covered employees, is confidential per Maine law. Justin Ward, executive vice president of Patient Advocates, a health insurance plan administrator in Gray that administered MaineSense, confirmed that the program is shutting down, but said he was unable to provide details about its members.

In a 2014 interview, Edwards told that MaineSense had 50 member companies that covered 4,500 employees and their dependents. That article also called MaineSense the “nation’s first group health insurance captive.” Cioppa said MaineSense is the only such organization in the country he knows of.

Cioppa said MaineSense was trying to take an innovative approach to alter the health insurance market for small companies. Most of the member companies were employers with years of experience running successful workers’ comp insurance programs, Cioppa said.

“They were hoping to take that experience and leverage it in health insurance,” he said. “They were committed. They really wanted to make a difference in the health insurance market.”

Jeff Fitzgerald, vice president at Innovative Captive Strategies in Des Moines, Iowa, said the closure was an interesting event in Maine because MaineSense was created by a change in Maine statute and is regulated by the state, not the federal government. But there were no wider implications for the captives industry.

Cioppa and Fitzgerald said the challenges MaineSense faced were not surprising. The nonprofit lacked a critical mass of member companies and suffered from high claims frequency, Cioppa said, which will always be a challenge if the risk pool isn’t large enough.


“If you get adverse claims development, especially if unexpected, it can have (a) significant effect on the financial performance of the captive,” Cioppa said, adding that the frequency of claims is often a crapshoot. “You can’t predict how many cancers and heart attacks you’ll have.”

MaineSense was attempting to be innovative in a few ways, he said. Central to the captive model was a wellness component, Edwards told Mainebiz in 2011.

“An employee can really control the risks within the workplace. But health insurance has traditionally been offered without any controls. Whether your employees smoked, or ate right, or saw a doctor regularly was completely outside your control,” he told Mainebiz at the time.

Cioppa said MaineSense notified his agency within the last few months that it would be closing down. The bureau is monitoring its closure and Cioppa said MaineSense has been very transparent throughout the process and is paying its bills. He said the member companies would have had time to investigate other health insurance options for their employees.

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