May 23, 2018
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Maine is returning to a familiar approach to lower health insurance costs

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DREAMSTIME/TNS | TNS
Maine's insurance bureau is holding public hearings on a proposal to resurrect a program designed to lower health premiums.
By Meg Haskell, BDN Staff

With health insurance premiums for individuals slated to rise nationwide by as much as 20 percent or more in 2019, Maine is looking to revive a mothballed mechanism to help hold those costs at bay.

At public information sessions later this week in Bangor and Portland, Maine Bureau of Insurance staff will take comments on a plan to re-establish the non-profit Maine Guaranteed Access Reinsurance Association. In 2012 and 2013, it helped defray the expense of insuring more than 3,000 Mainers with especially high medical costs related to specific diagnoses. Skeptics argued that benefits were eroded and questioned the extent to which the pool lowered premiums. But proponents said the program effectively held down the cost of individual insurance plans for many healthier Mainers, and the insurance bureau, with the backing of the Maine Legislature, says it’s time to bring it back into service.

MGARA originally funded its reinsurance pool by tacking a $4 monthly fee onto all private health insurance premiums in Maine, calling for insurers to chip in 90 percent of the monthly premiums of high-cost enrollees, and other mechanisms. High-cost consumers were unaware that their medical bills were being paid through the reinsurance pool, and their care was not affected.

Insurance companies saw the financial benefit of ceding their highest-cost patients to the reinsurance pool and responded. Anthem, by far the largest insurer in Maine’s individual market at the time, sought to raise its rates by only 1.7 percent in 2013, telling insurance regulators that it would have requested a rate increase of more than 20 percent that year if MGARA had not been in effect.

In an effort that ultimately failed, MGARA subsequently was used by Maine U.S. Sen. Susan Collins as a model for a proposed reinsurance pool at the federal level.

MGARA was suspended in 2014, when it became redundant with a provision of the Affordable Care Act and its impact became harder to track due to other changes in the insurance marketplace. But with the the sundowning of that temporary ACA provision in 2017, Maine Insurance Superintendent Eric Cioppa seeks to reactivate MGARA, this time with the federal government participating as a powerful new funding source.

“Rates are increasing and people need relief,” Cioppa said Tuesday. ”Anything we can do to help them is a good thing.”

If the proposal succeeds, he said, in 2019 individual insurance premiums in Maine will increase by less than half the average 18.2 percent rate hike projected in a recent analysis by the Urban Institute. Mainers who benefit most will be those who earn over 400 percent of the federal poverty limit and do not qualify for an ACA subsidy for their individual insurance.

About 75,800 Mainers signed up for individual health plans under the ACA in 2018, as opposed to plans provided through an employer or other group, and 64,800 qualify for subsidized premiums or other cost sharing, according to 2018 enrollment data.

Legislation passed last year authorized the Bureau of Insurance to reactivate MGARA, contingent upon the granting of a federal ACA waiver that encourages states to pursue innovative strategies promoting access to affordable health coverage. In the waiver application, Cioppa will ask the federal Department of Health and Human Services to help fund the new MGARA pool by prospectively contributing the value of higher federal premium subsidies it would have paid to qualified Mainers in the individual market had the rates not been held down by the MGARA program.

Because insurance subsidies are tied to premium costs, lower monthly premiums means fewer federal dollars spent on subsidies. Cioppa wants those unspent dollars for MGARA.

Cioppa estimates the strategy, in combination with the original MGARA funding sources, will net the reinsurance pool about $93 million for 2019, hold down premium increases by about 9 percent and help keep between 300 and 1,100 Mainers from being uninsured.

If the waiver application is rejected, Cioppa said he will explore other ways to restore MGARA’s operations.

Some critics say reinsurance programs, while effective in the short run, undermine the most basic premise of insurance, in which risk is spread equally among the largest possible pool of subscribers. Reinsurance, they argue, allows insurers to “cherry pick” a pool of healthier individuals who cost less to cover, resulting in greater profits for the insurer.

But independent health policy consultant Mitchell Stein of Cumberland said the health insurance markets are in such a state of instability that MGARA’s reactivation makes sense.

“Given the reality of our current situation, it’s a good thing to do,” he said. “We’re bringing new money into the system, and that will reduce rates for consumers.”

Stein cautioned that MGARA will create another layer of bureaucracy and additional administrative costs within state government, but he still supports the idea.

At the information sessions this week, Cioppa said, insurance bureau staff will explain the complicated reinsurance model and the waiver process to consumers, advocates and others and take their comments and questions.

“We want to explain what this is and what it isn’t,” he said.

Public sessions will be held in Bangor on Thursday, April 12 from 5 to 7 p.m. at the Husson University Board Room and in Portland on Friday, April 13 from 5 to 7 p.m. in Room 213 of the Abromson Community Education Center.

The bureau will also accept written comments through 5 p.m. on Wednesday, May 2. Comments should be emailed to karma.y.lombard@maine.gov.

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