HEALTH INSURANCE;

INSURANCE - HEALTH;

You asked for a summary of Maine’s Dirigo Health legislation.

The legislation has several parts. This report will focus on the new Dirigo Health Plan and its universal coverage provisions, as well as the high-risk pool. If you would like, we can summarize the Maine Quality Forum, state health planning, Capital Investment Fund, insurance rates, health care cost control, and veterans’ care provisions in one or more separate reports.

SUMMARY

Last June, the Maine legislature passed landmark legislation, dubbed “Dirigo Health,” to provide universal health insurance coverage to the state’s residents. The new law establishes a new executive branch agency to run the program, called Dirigo Health, along with an oversight board. The agency determines the services and benefits to be provided, as well as cost sharing obligations for participants. The agency is also charged with publicizing the program, and must contract with health insurance carriers to obtain this coverage.

As a result of the law’s passage, Maine residents will soon have expanded access to heath care coverage in essentially two ways. First, the law expands the state’s Medicaid program, MaineCare, by increasing the program’s income limits. For those who do not qualify for MaineCare, the law creates the Dirigo Health Plan, which offers new health coverage aimed primarily at employees of small employers and other uninsured individuals, with subsidies available to people with incomes below 300% of the federal poverty level (FPL). Higher income individuals can buy into the program by paying the full premium. Employers are expected to contribute towards the premiums (no more than 60%) with employees paying 40%.

Dirigo Health’s first year of operations will be funded with a one-time federal payment (enhanced Medicaid match) to the state. In future years, the state expects the program to be self-supporting, using a combination of additional Medicaid federal matching funds and “savings offsets” that all of the state’s insurers will be required to pay. The Dirigo Health board sets the offset amounts, which are based on a percentage of premiums the insurers collect in a given year.

For residents with pre-existing conditions, the law establishes a high-risk pool and directs Dirigo Health to come up with disease management protocols for these enrollees.

DIRIGO HEALTH

The act establishes Dirigo Health, which is an independent, executive branch agency. Its primary mission is to help the state’s small employers, their employees and dependents, the self-employed, and other uninsured individuals secure health care coverage. The program must be up and running by October 1, 2004. The agency is also charged with monitoring and improving the quality of health care in Maine.

Independent Executive Agency—Governing Board and Duties

An eight-member governing board will oversee the agency, five of whom are voting members that the governor appoints and legislature approves, along with the commissioners of Professional and Financial Regulation and Administrative and Financial Affairs, and the director of the Governor’s Office of Health Policy and Finance, or their designees. The voting members must have knowledge of and experience in one of more areas, including health care purchasing, health insurance, and MaineCare, among others. The board must meet at least quarterly. The board appoints an executive director and can request initial staffing from the governor.

Dirigo Health determines the services and benefits of Dirigo Health Insurance, as well as cost sharing requirements, such as premiums and co-payments, in accordance with the state’s insurance laws. The board must report on the benefits package to the legislative committees of cognizance within 30 days of determining the package. The agency’s other duties include:

1. establishing administrative and accounting procedures that the state controller recommends,

2. collecting the savings “offsets” that the law establishes (see below),

3. publicizing the program,

4. developing a high risk pool for plan enrollees (see below), and

5. establishing and operating the Maine Qualify Forum.

The agency’s revenues and expenditures are subject to legislative approval in the biennial budget process. The law requires the state auditors to audit Dirigo Health annually.

Contracts with Health Insurance Carriers for Dirigo Health Plan

The law permits Dirigo Health to contract with private health carriers to provide coverage to eligible individuals, with assurances that they meet all insurance mandates and pay health care providers at rates negotiated by the two. If private carriers do not apply to the program, the board is permitted to have the agency provide access by establishing a nonprofit health care plan or by proposing an expansion of an existing public plan. If it takes this latter route, the board must submit its proposal, including a funding mechanism to capitalize the nonprofit plan, to the legislature’s Health Insurance Committee, which must give its approval before the agency can proceed.

The law assumes that some Dirigo Health Insurance enrollees will get their services from federally-qualified health centers and makes provisions for reimbursing those centers accordingly.

Collecting Payments from Employers and Employees and “Crowd-Out”

The law requires Dirigo Health to collect payments from both participating employers and employees to cover (1) the cost of the health insurance; (2) the plan’s quality assurance, disease prevention, disease management, and cost-containment programs; (3) the agency’s administrative services; and (4) other health promotion costs.

The agency sets the contribution level, which cannot exceed 60% of the premium for employers. It must set an equivalent minimum for employers and employees to pay when the employees and their dependents are MaineCare enrollees. Dirigo Health must reduce the payment amounts for enrollees eligible for subsidies.

Participating employers must certify that at least 75% of their employees that work 30 or more hours per week and do not have other creditable coverage are enrolled in Dirigo Health and that the employer group otherwise meets the minimum participation requirements.

The law allows Dirigo Health to require eligible enrollees who are working for employers who do not offer health insurance to certify that the employer did not drop the coverage during the previous 12 months (“crowd out”). And it can limit the number of enrollees in the plan and establish other participation criteria.

Subsidies

The law permits Dirigo Health to establish sliding scale subsidies for the purchase of Dirigo Health Insurance paid by individuals or employees with incomes below 300% of the FPL who are not eligible for MaineCare. It permits Dirigo Health to limit the amount that the state subsidizes to 40% of the employee portion of the payment.

The subsidies will be on a sliding scale (as determined by Dirigo Health). Those individuals who can receive them include people who are:

1. self-employed,

2. unemployed (works less than 21 hours per week for a single employer),

3.

working for an employer with 50 or fewer employees who participates in Dirigo Health (the law permits larger employers after a year of operation), and

4. working for larger employers that offer health insurance meeting certain standards set by Dirigo Health.

Dirigo Health has 30 days from the time it establishes the subsidies to notify employers and employees of their eligibility for, and amount of, the subsidy. The board must report to the legislative committees of cognizance on the amount of the subsidies, the funding required for them, and the estimated number of program enrollees eligible for them.

Medicaid Expansion

In addition to the subsidy, the law increases the income limits for the MaineCare (Medicaid) program as depicted in the following chart:

The law assumes that a large number of MaineCare recipients will get their health care coverage by enrolling through their employers. These employees receive the same level of services but through Dirigo Health, instead of traditional Medicaid. Benefits are subject to nominal cost sharing, as permitted by federal Medicaid law. The state must provide services that are not available by a participating health plan but required by Medicaid law.

How the Program is Funded

The first year of Dirigo Health’s costs will be paid with $ 53 million in one-time enhanced federal Medicaid matching funds that all states received in 2003. (Connecticut put all of its funds into the General Fund as revenue to offset FY 2003-04 expenditures. ) For subsequent years, the program will be funded by payments that insurance companies make to the state and additional Medicaid revenues resulting from the MaineCare expansion.

Savings Offsets and Increased Medicaid Revenues. The law requires the board, after a hearing opportunity, to determine annually the aggregate measurable cost savings, including any reduction or avoidance of bad debt and charity care costs to health care providers as a result of operating Dirigo Health and any increased MaineCare enrollment. (The assumption is that people who are uninsured tend to put off getting preventive care or use emergency rooms, both of which can create potentially significant health care costs. )

The board must then establish a savings “offset” amount that health insurance carriers, employee benefit excess insurance carriers, and third party administrators must pay annually at a rate that may not exceed the projected savings. (The board determines this on a prospective basis annually, no later than April. ) The rate is set for each insurer at a maximum of 4. 0% of annual health insurance premiums and employee benefit excess insurance premiums on policies the insurer issues to state residents and applies to premiums paid on or after July 1, 2005. The offset is not paid by carriers and third party administrators with respect to accidental injury, specified disease, hospital indemnity, dental, vision, disability, income, long-term care, Medicare supplement, or other limited benefit health insurance. Likewise, insurance carriers do not have to pay offsets on policies or contracts insuring federal employees.

The law authorizes the state’s insurance superintendent to suspend or revoke, after notice and hearing, an insurance carrier’s authority to transact business in Maine for failure to make offset payments. It may also assess civil penalties or take other enforcement actions to collect the unpaid offsets.

In addition to the offsets, the state expects to see increased revenues from the federal government resulting from higher MaineCare enrollments.

The act requires Dirigo Health to transfer funds, as needed, to a special dedicated, nonlapsing revenue account which is maintained by the state MaineCare agency (Health and Human Services) as the state’s Medicaid match. It requires the establishment of a separate Dirigo Health Fund, into which funds advanced for initial operating expenses, employer and individual payments, and savings offset payments will be deposited. These latter funds do not lapse.

Reporting and Other Dirigo Health Duties

The law requires the Dirigo Health board to report quarterly on a number of items, including total Dirigo Health enrollment, old and new health insurance rates, and the number of employers who have stopped or started offering insurance to their employees. It must report annually to the legislature, beginning September 1, 2004, on the program’s impact on (1) the small group and individual health insurance markets and (2) the number of uninsured state residents.

Health insurance carriers and providers must likewise report, beginning March 1, 2005 and then annually, on their ability to recover savings offset payments, as reflected in reimbursement rates, through a reduction or stabilization in bad debt and charity care costs as a result of Dirigo Health and any increased enrollment in MaineCare.

The law requires Dirigo Health to perform numerous other functions, including (1) publicizing the insurance plan’s availability; (2) screening for subsidy eligibility and eligibility for MaineCare; and (3) promoting quality improvement, disease prevention, disease management, and cost containment. To facilitate this process, the law requires Dirigo Health to provide a single application for both programs.

HIGH-RISK POOL

The act requires Dirigo Health to establish a high-risk pool, into which Dirigo Health enrollees with certain diseases or conditions must be placed. Specifically, the pool is for people (1) whose total cost of health care services is more than $ 100,000 in any 12-month period or (2) diagnosed with one or more of a lengthy list of diseases, including AIDS, hemophilia, and Parkinson’s.

Dirigo Health must develop disease management protocols, along with procedures for implementing them for plan enrollees in the pool. And it must report, by January 1, 2006, on the protocols to the legislature’s Insurance Committee.

The act requires the board to submit legislation by January 1, 2008 to establish a statewide high-risk pool if, upon evaluation, it finds that the trend in average premium rates and the number of uninsured residents is higher than the 31 states that have established state-wide high-risk pools.

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