Maine Revamps Its Health Insurance Laws

Last week Maine Governor Paul LePage signed into law new legislation (L.D. 1333) intended to make sweeping changes to the Maine individual and small employer group health insurance markets. Reasonable minds disagree on the efficacy (and desirability) of the law. While many of the changes primarily affect those who obtain insurance on an individual basis (i.e., not through an employer), the new law does impact Maine employers that provide medical benefits to employees through group insurance contracts and, to a somewhat lesser degree, employers that provide medical benefits through self-funded arrangements.

In our view, the following aspects of the new law are the ones most likely to affect employers:

Repeal of Geographic Access Requirements in Rule 850. Rule 850, among other things, required insurance contracts to provide access to primary care within a 30 minute drive, and access to hospital services within a 60 minute drive, of the insured’s home. This rule was designed in part to protect people living in rural areas and those who have difficulty traveling from being required to go too far from home to obtain care. Critics of Rule 850 felt that the rule drove up the cost of coverage by requiring health insurers to contract with local providers throughout the state (regardless of cost or quality) and impeded attempts to direct health plan members to higher quality or lower cost providers that might be located farther away. L.D. 1333 addresses this by eliminating the geographic access restrictions and replacing them with a much more open ended requirement that health insurance contracts assure “reasonable access to health care services.” The new law also states that carriers can use incentives to encourage plan members to use higher quality/lower cost providers that may be farther away, but they can’t penalize people for using local providers. It’s anyone’s guess how that will be interpreted and applied by the Maine Bureau of Insurance. But the hope is that the elimination of the strict limits will help reduce the cost of coverage and, potentially, improve the overall quality of the care actually delivered to health plan members.

Assessment to Fund High-Risk Pool. The new law requires insurers to pay up to $6 per month per covered person to fund a high-risk pool for those with chronic conditions who might otherwise be uninsurable. Note that the term “insurer” is defined to include not just insurance companies and HMOs, but also certain self-insured plans, third party administrators, captive insurance companies and reinsurance companies. So somehow or other, pretty much every stakeholder will end up making a contribution (either directly or indirectly).

Expansion of Rate Differentials. Maine insurance law already permitted insurance carriers to vary premium rates for individuals and small employer groups (those with 50 or fewer employees) to account for factors such as age, smoking status, occupation or industry, geographic area and participation in wellness programs. For small groups the new law sets a maximum rate differential for geographic area and smoking status at 1.5 to 1. The new law also allows for gradual increases in the maximum rate differential for age over a period from October 1, 2011 (2 to 1) through January 1, 2016 (5 to 1), though insurance carriers will not be able to exceed a 3 to 1 ratio unless the Affordable Care Act is amended (beginning in 2014 the Affordable Care Act requires that rating variation based on age not exceed 3 to 1). Critics of the new law fear that these changes, coupled with the elimination of Rule 850, will disproportionately harm older citizens living in rural areas.

New Rules for Association Captive Insurance Companies. Maine law has long provided mechanisms for small employers to band together to purchase group health insurance, for example through trade associations and purchasing alliances. But the new law will allow employer groups essentially to form their own insurance companies and cover their employees with benefits that can be more tailored to their needs (as opposed incurring the expense of choosing from a myriad of options offered by insurance carriers). In addition, association captive insurance companies whose members have an aggregate net worth of at least $100,000,000 will be presumed to meet the law’s $750,000 reserve requirement if the Superintendent of Insurance determines that the funds are adequate to cover at least three months of claims and expenses. Finally, the new law expressly permits an association captive insurance company to: (1) elect to require its members to accept joint and several liability for the health insurance obligations of the captive; and (2) meet any financial and employer wellness criteria that the captive may establish. This will allow association captives to be much more selective in the choosing their members.

Additional Changes. The new law creates a tax credit, available beginning with the 2014 taxable year, of up to $2,000 per year to help employers with 20 or fewer employees establish wellness programs. The new legislation also makes changes to existing medical loss ratio requirements to comply with certain Affordable Care Act mandates.

Access to Out-of-State Insurance Plans. Finally, though not directly relevant to employers, we offer a few words about the highly publicized move to open Maine’s insurance market to out-of-state New England carriers (other than Vermont, which late yesterday enacted legislation adopting a single-payer system beginning in 2014). First, this measure only applies to carriers in the individual market so group health insurance plans are not affected. Second, by 2014 the Affordable Care Act’s state insurance exchanges and “essential health benefits” mandate will be fully operational and implemented, resulting in fewer differences between insurance policies offered by Maine-licensed carriers and those from outside the state. Third, the law contains a “parity” provision under which Maine-licensed carriers can either modify their products or offer new products having the same features as any out-of-state product offered to Maine individuals.

It remains to be seen whether these measures will actually help bring down the cost of health insurance in Maine, which is among the most expensive in the nation. But it’s hard to see anything in the new law that could make things much worse for employers struggling to provide reasonably affordable health care benefits to their employees.

(Many thanks to Kim Condon Lane, of Maine Street Solutions, for her assistance in putting this post together.)