The state’s Dirigo Health Agency says it can and will pay back the money it has borrowed from the general fund to keep the subsidized health insurance program going, having run up a $20 million tab because the assessments charged to cover expenses don’t come in on a timely basis.
“If the program were to shut down today, we could pay off the loan,” said Karynlee Harrington, head of the agency, explaining the deficit is a result of a cash flow problem and the assessment ultimately would come in to pay off the bills.
The agency charges health insurance carriers and self-insured businesses an assessment that is set annually to pay for the DirigoChoice insurance, but takes up to two years to collect. That has left the program short of needed cash – a problem that still persists.
Harrington said under the worst-case scenario, the debt could get as high as the “high-water mark” of $20 million reported by the fiscal office at the end of July, but will more likely settle in at around $14 million. The agency has been short on cash each month since November of 2007, and the State Controller has been stepping in to help pay the bills out of cash reserves.
“This line of credit was temporary. We need to figure out how we’re going to balance it by the end of the year,” Harrington told the Dirigo board of directors Monday.
The agency thought it had the fix when the Legislature earlier this year passed a set of taxes on beer, wine, soda and health insurance to replace the current assessment known as the savings offset payment. But those taxes are being challenged by a people’s veto on the November ballot.
If that challenge is successful, Harrington said she likely will go to the Legislature early next year to change the law to make collecting the current assessment more timely. If the veto fails, the state can start collecting the new Dirigo taxes on a monthly basis. Those taxes will raise anywhere from $55 to $75 million annually, as compared to the roughly $33 million now being collected under this year’s savings offset payment.
Since the fate of the November referendum is unknown, Harrington told her board it had to prepare for the reality that the agency will run out of cash if it doesn’t make changes to the DirigoChoice program. The current assessment, regardless of when it is collected, comes up short.
The board Monday approved a change in the coverage that requires enrollees to pay more out-of-pocket before the insurance kicks in for some procedures, but protects coverage of office visits, prescription drugs and prevention programs. It also agreed to ask for a premium rate hike of 10.8 percent for individuals and 6 percent for small groups.
The DirigoChoice program was approved by the Legislature five years ago as a means to cover the state’s 130,00 uninsured. Enrollment in the program has been capped to save money and is down to 11,500, from a high of 15,000 last September before the cap was put in place.
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