Gov. Mills and Democratic leadership have good intentions. They want to improve affordability and usability of health insurance in the small group and individual markets. The administration has proposed an innovative customization of the combined insurance markets, seeking to extend the successful invisible risk pool reinsurance program that’s already lowering premiums in the individual market; to merge the small group and individual markets into a single pricing pool, and to require all plans to offer the first three primary care or mental health visits to be at reduced cost-sharing. Furthermore, the state will be taking on more responsibilities in administering the marketplace from which individuals can buy health insurance.
However, these steps may not be enough to achieve the goal of making health insurance more affordable for small employers trying to afford insurance for their workers and the workers’ families. Instead, insurance will become more expensive for most small groups and for many middle-class families buying their own insurance on the marketplace.
The governor and her administration believe that merging the small group and individual markets will lower premiums by increasing the number of people covered in a single risk pool. They are right in that a bigger risk pool lowers the cost of insuring against idiosyncratic, one in a million events.
But there are two problems with this theory. First, idiosyncratic risk was not common in 2018, when Harvard Pilgrim was the only small group insurer with at least one individual who had a $1 million claim year. Extending reinsurance into the small group market could readily address the very few individuals who need a million dollars or more of medical care in a single year.
Secondly, the small group market and individual markets are very different from one another. The current Maine small group market is much healthier than the Maine individual market.
In 2018, the average risk score – a measure of expected costs used by the federal government to compensate insurers covering very sick individuals – was 28 percent higher for the individual market than for the small group market. Insurance markets that cover sicker people will have higher monthly premiums than markets covering relatively healthier people. Our preliminary calculations using 2018 data suggest that a merged market would increase small group average premiums by a third. Individual market premiums would decrease by 15 percent, but those savings would not be passed on to Maine’s citizens; instead, the federal government would pocket the savings.
The governor and her team also propose to increase the benefits of health insurance sold in the individual and small group markets by mandating that the first three primary care or mental health visits have favored cost-sharing. While making coverage more accessible is an admirable goal, this will likely increase premiums slightly, as any savings that could occur from better preventative care are unlikely to occur quickly.
The proposal is multi-faceted, and space prevents us from discussing it all; however, one more element is worth focusing on. The proposal says that Maine’s reinsurance program will only reimburse certain expenses at 200 percent of the Medicare rate. As the proposal stands, the insurance companies would be responsible for the balance. However, a more impactful approach would be to mandate that providers accept the 200 percent of Medicare rate as full payment. This would be an effective way to reduce costs for the program. It also would put us on the road to reducing health care prices for everyone, regardless of their coverage (or lack thereof).
We know we have a health care crisis in this country. We also know the prices we pay in this country for health care are the highest in the world, while we don’t see better results than many other countries. It’s time to start reining in those health care prices. Using this proposal to test the waters would be a great step forward. Once we see that a little rate regulation does not result in the end of the world, we can expand the idea to all health costs.
We applaud the governor and her team for grappling with the challenges of affordability in the individual and small group health insurance markets. Maine’s citizens, businesses and employers need to be able to afford high-quality health care. This is a good first step, but the intricacies of the market must be acknowledged as Maine moves forward.