For Immediate Release
Nobody expected the new health insurance law to yield benefits immediately. Some parts of the reform haven't even gone into effect yet, and fixing Maine's dysfunctional system will take time. For Sam Marcisso, however, the law seems to be working just fine.
Earlier this year, his insurance agent told him to brace for a 15 percent premium hike when he renewed the policy for his small company. Marcisso runs Pine State Services, a South Portland company that does plumbing, heating and air conditioning work.
"That's not the news you want during these challenging times," says Marcisso, who employs 27 people. The insurance agent told him the increase was due to higher costs associated with the Affordable Care Act, better known as "Obamacare."
Marcisso was accustomed to annual increases in health insurance rates, but 15 percent represented a big financial hit. Then a funny thing happened. The Maine Legislature passed LD 1333, an insurance reform package that moved Maine back into the American mainstream.
Last summer, after the bill was signed into law, Maine was liberated from the onerous regulations that made insurance nearly unaffordable. That's when Sam Marcisso's insurance agent came back with better news. As it turns out, his rates, instead of shooting up, fell by 18 percent. "It was the first good news we've heard in a long time," he says. "This new law will save us $30,000 a year. When we renewed our policy, it freed up enough money to add a new employee."
Sam Marcisso's story is not unique. We are starting to see the first hard statistics on the effects of the reformed system. Maine's Bureau of Insurance has gathered data comparing the fourth quarter of 2010 with the fourth quarter of this year. The numbers are for the small-group market, which consists of companies with fewer than 50 employees - the vast majority of Maine businesses.
First, the percentage of businesses receiving a decrease in their health insurance rates went from 1.99 percent in 2010 to 8.99 percent in 2011. Obviously, it is a very positive development when nearly five times as many companies are seeing their rates decline.
Second, the number of Maine businesses receiving increases between 20 percent and 40 percent declined from 26 percent last year to 20.8 percent in the fourth quarter of 2011. No increase is good, but the results show that the new law is beginning to have a moderating impact on rates. These moderating influences will become even stronger as more insurance carriers enter Maine and begin offering a variety of policies.
The lack of competition has been a major factor in our health insurance costs, which have ranked among the highest in the country. Most states have numerous insurance companies offering policies to fit every budget. When Maine passed insurance "reforms" in the early 1990s, all but a few insurers fled the state, leaving us with a near-monopoly held by one company. One of the major planks of the new law involves bringing more insurance carriers into the state, generating rate competition.
It's important to remember that this new system is not experimental or revolutionary. The principles have been used successfully around the country to create stable yet competitive health insurance markets. Over the next few years, Maine will be put back on the road to health insurance normalcy.
At the same time, the law was carefully crafted to mesh with the standards of Obamacare, which is facing a constitutional challenge before the Supreme Court. Regardless of the ultimate fate of that law, Maine is now positioned for the best possible outcome whether or not Obamacare is implemented.
The new law makes many changes to Maine's insurance system. For example, it slowly modifies our community rating laws to give young people the premium benefits of their youth and health. These are exactly the folks we need in the insurance pool to help lower rates across the board. Under the old system, they were effectively priced out of the market.
It also establishes a Guaranteed Access Plan, which will ensure that even the highest-risk individuals and the chronically ill can obtain insurance at the same rates as others in their age groups. Their premiums will be subsidized by a $4 monthly fee on all private insurance policies. That fee will be more than cancelled out by the drawdown of the DirigoChoice program, which imposes a 2.14 percent tax on paid medical claims, driving up insurance costs. On balance, private insurance premiums will drop.
Perhaps not everyone will be as fortunate as Sam Marcisso and his 18 percent reduction. This road will not be short or smooth. There will be bumps along the way and a period of adjustment, but ultimately, Maine's market will be healthier, more competitive and less expensive for all. ###
State Rep. David R. Burns (R-Alfred) serves on the Legislature's Taxation Committee
Maine House Republicans
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