Michael V. Saxl, Speaker of the House
Before the Joint Standing Committee on Banking and Insurance
February 7, 2002
LD 1784, An Act to Lower Costs in the Small Group Market
Senator LaFountain, Representative O’Neil and members of the Joint Standing Committee on Banking and Insurance: my name is Michael V. Saxl and I represent House District #31, part of Portland. I am delighted to be before you today to present language for the concept draft to dramatically lower the costs in the small group market.
As you are all aware, the small group health insurance market is in serious trouble. Health insurance premiums have risen to unaffordable levels for many small businesses and self-employed people. This crisis has implications for the health of Maine’s citizens and for the health of Maine’s small businesses. At the personal level, lack of insurance increases one’s chances of early death by 25%. Yet employer-sponsored health insurance covers just 60% of Maine people, and 71% of the uninsured are employed.
A survey conducted by the Maine Center for Economic Policy showed that 81% of small business owners feel that health insurance is important to their ability to attract and retain quality employees, and 87% believe that offering health insurance is the right thing to do as a matter of principle. But Maine small businesses have been challenged to provide health coverage by rate increases of 58% in recent years, with a 49% increase in just the past two years. In 1999, the percentage of small businesses offering health care coverage dropped from 77% to 68%, and with more increases on the horizon, we can expect that figure to decline further still. This is of particular concern because small businesses constitute over 90% of Maine’s businesses and employ nearly half of Maine’s workforce.
Some small employers are turning to high deductible policies that provide no benefit until medical bills reach into the thousands of dollars. But people with this type of coverage tend to behave as though they are uninsured—they do not get preventive and early diagnostic care that would keep them healthy, and they do not seek care until they are very sick. This means a decline in health status for our workforce and higher long-term costs of providing sickness care that could have been avoided and providing care through expensive venues such as the hospital emergency room.
With a crisis this large and imminent, it is imperative that we take bold steps to protect Maine citizens’ access to health care. The proposal you have before you provides part of the solution to Maine’s health care crisis by creating a public-private partnership modeled on the best parts of premium assistance programs from other states and Maine’s own MEMIC.
The Maine Small Business Health Coverage Plan is a voluntary health plan for small businesses and self-employed people in Maine. It arose from discussions with state and national health policy experts, consumer groups, insurance carriers and providers about what works to make health care affordable.
The most important pieces that make this plan work are as follows:
The plan will be overseen by a publicly appointed board consisting of one representative of the self-employed, one representative of organized labor, one small business representative, one representative of health care consumers, a representative of Maine’s low income citizens, a health care provider representative, a health policy expert, and a health economist, with the Commissioner of Human Services serving as a non-voting ex officio member.
The board will be responsible for plan design, establishment and review of a provider rate schedule and employer and employee contribution schedules, and for requesting proposals from private insurance carriers and the Department of Human Services for providing the plan. To do this, the board will first acquire actuarial and marketing analysis assistance. Once the plan is operational, the board will have a continuing oversight role including authority to alter plan design and review the provider reimbursement schedule.
Initial plan design will be based on the State Employees’ Health Plan. The benefit package will include access to preventive and early diagnostic services, which are the most critical components to promoting improved health status and healthy behaviors as well as to controlling long-term health costs.
The board will establish a provider fee schedule designed to contain costs while ensuring access to care and fairly addressing the costs of providing care. The fee schedule will be reviewed regularly to ensure that it continues to accomplish these goals.
The board will issue a request for proposals to which private carriers will be encouraged to respond and the Department of Human Services will be required to respond. The board will set a realistic loss ratio for the plan and the competitive bidding process will encourage maximum administrative efficiency. Bids will be accepted for all or part of the plan and awards may be made to multiple carriers.
The really exciting part about this plan is that, for the first time, it brings federal dollars into the equation to cross subsidize employer and employee contributions and lower the cost of coverage across the board. This works by including employees in the plan who are categorically eligible for Maine Care programs (Medicaid and Cub Care) and maximizing eligibility for Maine Care by increasing the amount of income that can be disregarded in the eligibility calculation. Although we must have a complete market and actuarial analysis before we can talk in hard numbers, we believe a significant portion of small business employees will qualify for the expanded Maine Care eligibility and that means a lot of federal dollars will be available to subsidize the plan.
This proposal is an innovative approach to a very complex problem. It works because it calls on all the players in the health care arena to participate and be part of the solution. Carriers will offer a limitation on administrative costs and profits in exchange for a standardized fees schedule. Providers will offer a set fee schedule in exchange for regular across-the-board review of that schedule. Business owners and workers will offer mandatory contributions (if they choose to participate) in exchange for access to comprehensive, quality health care.
I hope you will give this proposal careful consideration and help Maine’s small businesses to do what they want to do: provide health care coverage to their employees.