The Dirigo Health Board of Directors has voted to assess health insurance companies and self-insured businesses $34 million in 2007 if the Legislature doesn’t come through with an alternative way to fund the state’s subsidized insurance plan now covering 13,300 Mainers.
While the move was not unexpected, the worry among insurance companies is the assessment meter started running Jan. 1, and they have not even told their customers that it will be tacked onto their premium bill.
Karynlee Harrington, Dirigo Health director, said the assessment – known as the savings offset payment – only will be collected if the Legislature fails to approve an alternative.
“It’s not our intention to collect the savings offset payment,” Harrington said, but the board wanted a “placeholder.” “They feel a responsibility to guarantee that there is funding until an alternative funding arrangements is identified,” she said.
A special commission on Dirigo is recommending that alternative be a package of sin taxes, including an increase in taxes on cigarettes, beer and wine and new taxes on soda pop and snacks. Together, they would raise $67 million if all were enacted. The governor’s Blue Ribbon Commission on Dirigo Health also recommended in December that some way be found to collect from insurance companies or providers the $5 million to $8 million saved in bad debt and charity care as a result of the Dirigo Health initiative.
That package is supposed to replace the savings offset payment, which has generated several lawsuits and considerable political ill will since it was first imposed in 2006 at just under $44 million.
The state’s insurance bureau approved the 2007 assessment for just over $34 million, based on estimated savings achieved by a voluntary cap on hospital expenses, fewer medically related capital projects and a reduction in bad debt and charity care as a result of more people being insured under the Dirigo Health plan. The Dirigo board voted at the end of December to collect all of it, if needed.
Harrington said she needs the $34 million – either through the savings offset payment or some alternative – to grow the insurance plan called Dirigo Choice from its current 13,300 enrollment to an estimated 17,000 by the end of 2007.
The plan is provided by Anthem Blue Cross and Blue Shield, and the state subsidizes the premium for low-income participants. Like most insurance plans, the premium is going up next year – in Dirigo Choice’s case, an average of 13 percent.
The money also is being used to expand traditional Medicaid to parents whose children already were eligible for the program based on family income.
If no funding alternative is found, the savings offset payment will be collected, unless the Legislature changes the law. The cost of it would be tacked onto premiums.
Insurance regulations say customers must be notified 60 days in advance if their premiums are going to go up, and many employees of small businesses already have received their rate notices for January.
“We continue to have serious concerns about relying on the SOP as the mechanism to fund Dirigo,” said Mark Ishkanian, the spokesman for Anthem in Maine. “We also have concerns about how to implement the decision,” he said, since Anthem – the state’s largest health insurer – has not notified its customers of any rate hike due to the savings offset payment.
Ishkanian said Anthem remains optimistic the offset payment won’t be charged and recommendations made by the Dirigo Blue Ribbon Commission will be adopted.
Harrington said one option could be collecting the $34 million over nine months instead of 12, giving insurance companies more time to notify their customers.
She said if the offset payment has to be collected, her staff will work with insurance carriers and businesses to find a compromise that works. The goal, however, is to get the Legislature to change the funding mechanism.
“We all have the same goal, which is we don’t want to collect the savings offset payment,” she said.
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