February 23, 2018
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Separating fact from fiction on insurance reform

By Jim Parker, Special to the BDN

During the legislative debate over health insurance, opponents of reform tried to drive a wedge between northern and southern Maine and between younger and older Mainers. The drift of their argument was that older, rural residents would see their insurance premiums skyrocket and they would be forced to travel long distances for health care.

The debate left many Mainers bewildered. Insurance is complicated, the terminology is specialized and the ideological battle degenerated into distortions and scare tactics by those who favored the status quo. Now that the bill has been signed into law, let’s look at the facts.

To begin with, there is nothing radical about the new law. The changes to Maine’s insurance regulations are already the norm in most states. One of the few pioneering initiatives is the ability to shop for affordable coverage across state lines starting in 2014 — a popular feature.

Up until now, Maine has been extreme in insurance regulation, leaving us with some of the nation’s highest rates. Some 133,000 Mainers have no medical insurance at all. Young people in particular are likely to have no coverage, and employers find it increasingly difficult to provide insurance for their workers because the cost can be exorbitant.

Only structural reform could move Maine into the American mainstream. If the system works here as it has worked in states with similar demographics, it will expand competition and choice and reduce premiums. Businesses, moreover, will be able to band together to form larger insurance pools to keep costs in check. Small companies that provide wellness programs will receive tax credits.

The critique that older residents of rural Maine will see premiums “skyrocket” is unfounded. Maine’s system has — and will retain — a so-called “age rating band.” The current rating band is highly restrictive at 1.5 to 1. This means that a 60-year-old can be charged only 1.5 times the rate paid by a 20-year-old. Put another way, the 20-year-old pays two-thirds as much as someone age 60.

Starting on July 1, 2012, insurance companies selling individual policies will

change to a rating ratio of 3 to 1. This is where opponents of reform tried to confuse older Mainers, asserting they would pay three times more than they are paying now. However, the change doesn’t mean higher rates for anyone. Older Mainers will pay what they are paying now — probably less. A primary objective is to lower rates for younger residents to expand the insurance pool. The 3-to-1 ratio, incidentally, is the same one used in the new federal Affordable Care Act, the so-called “ObamaCare.”

Consider states that have much broader rating bands. For example, New Hampshire currently has a 4-to-1 band, and North Dakota, demographically similar to Maine, has a 5-to-1 rating band. Yet 60-year-old people in those states actually pay less than a Mainer of the same age with our 1.5-to-1 age band.

When Maine introduced community rating laws 18 years ago, the idea was to force insurers to average the rates. In theory, the 20-year-old and the 60-year-old would each end up with the rate a 40-year-old would pay. In reality, however, almost everyone pays closer to the 60-year-old rate.

Opponents of the new law also suggested that people in poor health will pay more for insurance. Actually, people with expensive, chronic conditions will pay the same as healthy people of the same age thanks to a new subsidy program. Additionally, Maine laws on “guaranteed issue” and “guaranteed renewal” remain in place. No insurer can cancel your policy if you get sick.

Another red herring floated by reform opponents was that residents of rural Maine would be forced to travel outside their region to receive medical care. That is false. The new law repeals Rule 850, which prevented insurance companies from giving financial incentives to consumers who sought less-expensive care outside of their immediate area.

For example, if you needed a procedure costing $20,000 in Aroostook County, but only $12,000 in Bangor, your insurance company could offer you an incentive to travel to Bangor. They might reduce your deductible, making the arrangement financially advantageous for both parties. However, if you preferred, you could still get the work done in Aroostook.

The new law, in short, will restore Maine to insurance normalcy. Over the next few years, the various features will take effect in stages to ensure an orderly transition. Mainers have asked for relief from our broken insurance system for a long time. Finally, help is on the way.

Jim Parker, R-Veazie, represents District 18 in the Maine House of Representatives. An environmental engineer, he serves on the Environment and Natural Resources Committee.

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