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Monday, November 8, 2004
Small businesses, big role
Copyright © 2004 Blethen Maine Newspapers Inc. | ||||||||||
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Also on this page: In Depth: Health Care Reform | |||||||||
Last in a two-part series Since the state's new health insurance program DirigoChoice burst onto the commercial market Oct. 4, nearly 1,000 self-employed Mainers and their dependents have applied for individual plans. A more muted response has come from the program's target customers: firms with under 50 employees, where a little over half of Maine's workers are employed - many without health benefits. Twenty-one employers have mailed in applications. Whether this is a bad sign for DirigoChoice, part of Gov. John Baldacci's plan to curb Maine's uninsured rate, is up for debate. His administration, which is overseeing an advertising campaign for the program launching today, tends to think it is a prelude to better things to come. What's clear is that DirigoChoice coordinators and Anthem Blue Cross Blue Shield of Maine, the insurer hired to administer the program, need to attract a critical mass of small businesses to make the program work. DirigoChoice cannot consist of just individual policy-holders, a population that tends to be sicker and more expensive to cover than group markets. And by zeroing in on small businesses that don't offer coverage right now, DirigoChoice could reach a significant chunk of an uninsured population that tops 130,000. Premium costs are going up for all employers, but hitting owners of small firms particularly hard. They are getting less value for their dollar because they do not employ enough people over whom they can spread risk. Double-digit rate increases in recent years have forced them to scale back coverage, sharply raise employee shares or not offer insurance at all. The lowest rates of coverage were among the self-employed and people working at firms with 10 or fewer employees - 27 percent and 31 percent, respectively, according to a 2002 survey by the Muskie School of Public Service. Janiska Boudreau, owner of the Falmouth Flowers shop, says she would love to cover her three employees, but she can't afford a $600-a-month premium for herself. "It's absurd," Boudreau said. "It's either insure (the employees) or go out of business. I can't do it." Even workers at larger businesses are not guaranteed coverage. Almost one in five of Maine's uninsured work at firms with more than 50 employees. A movement led by Republicans and some business leaders is afoot to let small firms band together nationally and buy more affordable coverage through so-called association health plans. A small but growing group of employers are trying to lower costs by pairing cheaper, high-deductible plans with tax-free health savings accounts. DirigoChoice takes the opposite approach: Let government step into the private market and take some of the burden off small businesses. The hope with DirigoChoice is to cover as many uninsured Mainers as possible, place them on the path to preventive care and avoid expensive crises in the emergency room that lead to $275 million in unpaid medical bills each year. DIRIGOCHOICE CHALLENGE The landscape of the health insurance market in Maine hinges on the program's success, and that of other reforms of the governor's Dirigo Health act. While DirigoChoice attempts to increase access to care, other initiatives focus on reining in health care spending and promoting quality and, ultimately cost-efficiency, in health services. The plan is that the different approaches will work together to bring down costs and make health insurance more affordable. If DirigoChoice and other measures such as tighter limits on hospital spending do not produce savings in Maine's health care system three years into its operation, a Republican-driven provision in the law kicks in. The Legislature would have to consider a bill creating a high-risk pool, which would separate Maine's sickest and most expensive insurance consumers from the rest of the population. The goal is to drive down premium costs for everybody else, but critics of the strategy say the most vulnerable will be priced out of the market. The challenge facing DirigoChoice coordinators is explaining to small business owners why they would want to buy DirigoChoice. At first glance, DirigoChoice looked no better than the Anthem plan that Chris Bowe buys for his employees at Longfellow Books in Portland. "I appreciate the state's effort and I'd like to support it, but the reality is that it would be fiscally irresponsible for us," Bowe said. Its base plans are comparably priced to what's available on the market - with $1,750-deductible plans starting at $287 for a single person and $860 for a family. But income-eligible employees can get deductions on the premium, the deductible and out-of-pocket maximum costs - something unbeknownst to Bowe. Marketing the subsidies, which are available on a sliding scale, will be key to landing accounts, says Trish Riley, the governor's top health policy adviser and the chief architect behind the health reforms. The subsidies will be heavily stressed in the new ads, paid for by a near-$1 million grant from the Maine Health Access Foundation and splashed across television, radio and newspapers over the next month. SELLING POINTS David White, owner of an automotive repair shop in Bar Harbor, plans to drop his Anthem plan and sign up for DirigoChoice. He will continue paying 100 percent of premium costs for his three mechanics at a savings of $5,500 that he plans to convert into raises. His workers, meanwhile, would qualify for reduced deductibles and co-pays. "That's a beautiful thing - there is no other insurance doing this," White said. But the subsidies won't work as a selling point for everybody. The income eligibility cut-off is three times the poverty level - no more than $28,000 a year for a single person, or $56,550 for a household of four. "I have some managers who definitely make more than" $28,000, said Lance Meader, owner of the Portland sports bar Rivalries. DirigoChoice also must overcome other obstacles to attract businesses, especially those that have never offered insurance. To form a small group in the insurance market, an employer needs 75 percent participation from employees as mandated by state law. That may be a difficult quota to meet in a small business, where some employees opt out if they can get a better plan through a spouse or because they'd rather not pay the cost. Employers also would have to pay a one-time membership fee that varies by firm size, contribute at least 60 percent to the employee's premium cost, and unlike their workers, would not be eligible for any subsidies. But Riley says incentives have been built into DirigoChoice for small businesses. DirigoChoice, supporters say, offers a better price for a fuller range of benefits, such as 100 percent coverage for preventive services like check-ups and mammograms. It also will be the only insurance product in Maine for small groups and individuals that offers mental health parity, meaning that certain services must be covered like a physical ailment. The Healthy Maine Rewards program might be the extra boost for an employer on the fence about DirigoChoice. Once three-quarters of employees in a company pick a primary care physician and go for a check-up, they each get $100 and their employer becomes eligible for a reward, too: $1,000 if the company has fewer than 10 employees, and $1,500 if the business has more than that. Less tangible, but just as important, is the employee loyalty bred by the availability of affordable health insurance, Riley says. Surveys show that health insurance and vacation time are the top fringe benefits sought by workers, she says. "It keeps your workers healthier, they have fewer absentee days and they're less likely to leave," Riley said. HOW IT'S FUNDED While rare, Maine's health insurance program is not the first in the country to offer subsidies. But it is the first to propose such a unique way to pay for it. The bulk of the program will run on contributions from employers and employees like any commercial insurance program, and in the first year, $52 million in start-up funds allocated by the Legislature. In subsequent years, the state funds will be replaced by an annual fee on insurers' gross revenues that will be levied only if savings are produced by the health reform initiatives. Riley says those savings will be calculated by seeing how Maine compares to the country in terms of health spending and uninsured rates. Money also is expected to come from the federal government. DirigoChoice is open to Mainers eligible for MaineCare, which is being expanded to include nearly 14,000 more adults three months after DirigoChoice takes effect Jan. 1. For every state dollar spent on MaineCare, Maine receives $2 from the federal government. How much DirigoChoice receives in federal funds depends on how many MaineCare-eligible people sign up for the program. It's hoped that employers will want to cover these employees, even though they could just enroll in MaineCare, so that if they receive a raise they will still have coverage, and likely qualify for subsidies. CRITICAL MONTHS The coming months will be critical for DirigoChoice. December and January are the months when many businesses will have to decide whether to renew their insurance plans for another year, or - DirigoChoice coordinators hope - consider switching to another company. Cigna's unexpected exit from the small group market also presents a possible opening for DirigoChoice. Cigna stopped accepting new enrollees in June, and said it will terminate existing business with 3,000 members Jan. 1. While ever optimistic about DirigoChoice's outlook, the Baldacci administration has rejiggered its goals. When first announced last year, it was projected that DirigoChoice would insure 31,000 people in its first year and help Maine achieve universal health care after five years. Anthem now says that "if we meet 10,000 (businesses in the first year), it'll be amazing," Riley said. And since its original July launch date was pushed back to Jan. 1 because of delays in designing DirigoChoice, the timeline for reaching universal health care in Maine is up in the air. "It's going to take time, and of course, it's voluntary," Riley said. "We've got to wait and see now that we're out in the field." Riley says she is not discouraged that take-up of DirigoChoice by small business has been slower than by individuals. She says that individual policy-holders have been capped at 4,500 - prompting a surge of interest. Meanwhile, small business owners have many logistical hurdles to jump, like gauging interest in DirigoChoice among employees and filling out paperwork, she says. Each employee also must complete an application, a process that is complicated if they qualify for subsidies. The prognosis for DirigoChoice will be clearer in a few more months, says David Clough of the National Federation of Independent Business, which is neither opposing nor supporting the program. "It's premature to drop conclusions but obviously there hasn't been a big rush yet," said Clough, state director of the trade group, which has more than 5,000 members in Maine. "We really have to go through the last quarter and see what the reaction is." For more information on DirigoChoice, log onto www.dirigohealth.maine.gov.
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