Even as many states gear up for tougher insurance regulations under the federal health law, Maine lawmakers last year bucked the trend, loosening rules they blamed for some of the highest premiums in the nation.
Proponents promised lower rates for all Maine residents, with increased competition among insurers. But six months after the state’s rules took effect, no new insurers have entered the state – and health insurance premiums have gone up for the vast majority of small businesses.
The results have been mixed for individuals: Everyone under 40 saw rate cuts, while most people over 55 received increases, some as high as 18 percent, according to an analysis of state data released Tuesday by advocacy group Consumers for Affordable Health Care, which opposed the law changes. Overall, a little more than half of individuals saw their rates rise, albeit by a relatively low 1.7 percent average.
Both sides say the early results buttress their arguments amid a national debate over whether regulation is a cause of or a solution to high premiums.
“The data are pretty clear (the changes) raised rates on the elderly and did not significantly lower them for the young and healthy,” said Joseph Ditre, executive director of the advocacy group.
But Joel Allumbaugh of the conservative Maine Heritage Policy Center called the early results “promising” and predicted rates would come down as more young people purchased insurance.
Outside experts say the one indisputable conclusion from the state’s experiment may be how difficult it is to reduce premiums across the board just by tinkering with insurance rules.
“Insurance reform [whether in Maine or the federal law] is about ways to make what we charge consumers more fair, but it’s not a means to reduce the cost of insurance,” says Robert Laszewski, a former insurance industry executive who now runs an Alexandria, Va., consulting firm. “It’s simply shifting the cost of insurance to different populations.”
Lauded by the Maine Heritage Policy Center as an example to Congress and other states to “reverse and replace” the federal health law with “market based approaches,” Maine’s legislation was expected to attract new insurers and lower premiums, which cost an average of 36 percent more than in other states.
In fact, the state’s new rules generally mirror the federal health care law, rather than being less stringent.
The state law made three major changes: It gave insurers more power to vary premiums, freed them from seeking state approval for rate increases under 10 percent, and created a “reinsurance” fund to protect them from their most costly medical bills.
Insurers can now charge older residents up to three times more than younger ones -- twice the spread they were allowed under the state’s old rules, adopted in 1993 to insulate older people from higher costs. Because older people generally have higher medical expenses, insurers had charged young policyholders more to make up the difference. Only seven states currently have such “community rating” rules for policies sold to individuals. That will change in 2014, when the federal law sets a 3:1 ratio for premium variation based on age, just as Maine’s law now does.
For states without such rules now, the changes required by the federal law will likely spell higher premiums for young people, and lower premiums for older ones -- the reverse of what happened in Maine.
However, the federal health law includes subsidies to help low and moderate income residents, including young people, buy coverage, which could offset the increases.
The report from Consumers for Affordable Health Care shows that nearly 54 percent of people buying their own coverage from Maine’s dominant insurer, Anthem Blue Cross and Blue Shield, saw rate increases, mostly older policyholders.
Anthem has about three and a half times more members over age 55 than under age 40, according to Chris Dugan, director of corporate communications.
A Maine Bureau of Insurance report released earlier this year found that 10 percent of small businesses, which are served by several insurers, saw a rate decrease in the first six months, compared with 3 percent of small firms before the law. Still, the vast majority saw rates continue to rise.
“We were given a $75,000 increase, about 32 percent,” said Jim Miller, manager of WoodenBoat Publications, a business in Brooklin with 40 employees on its health plan. After Miller agreed to higher deductibles, his increase was reduced to 22 percent.
For policies sold to individuals, the law created a “reinsurance” program, which shields insurers from costly medical expenses, funded by a $4 per person monthly tax on most policies sold to individuals and businesses. Policyholders expected to have big claims are put in the pool, which then pays for at least 90 percent of costs exceeding $7,500.
Without the program, insurers would either see reduced profits or pass the costs onto consumers.
A similar reinsurance effort is included in the federal health law.
In state filings, Anthem credited the program with reducing the average increase for individual policies. Without it, the insurer said, the average increase would have topped 21 percent. Another insurer, Harvard Pilgrim, originally sought a 12 percent average increase, but after “we worked with them on the reinsurance, the final number was a little over 3 percent,” said Eric A. Cioppa, the superintendent of the Maine Bureau of Insurance. “Those are really encouraging numbers.”
While no new insurers have entered the state, supporters of the new rules note that Anthem did introduce a new policy with premiums up to 60 percent lower than for the old plans, state data show. However, the policies don’t cover childbirth, and individuals could face as much as $15,000 to $33,500 annual out-of-pocket costs.