The Pitfalls of Forgoing a Health Insurance Mandate: Maine's Experience
Last time I made my case that having a health insurance mandate up front in the reform process actually gives you the upper hand in future debate. It can also accelerate real change by exposing market dysfunction as the real driver behind exorbitant costs. As in, "Hey, we're all in the insurance pool now but costs keep rising. Do something about it, Congress." But you don’t need to take my word for it. Maine has already been down that path. Follow along as we trace the state's experience in avoiding a health insurance mandate.
In the 1990s, Maine set up some fairly strong consumer protections. It banned insurers from discriminating against those with pre-existing conditions in the individual and small group markets. It was now a guaranteed issue state, so insurers had to take all comers, although they could still exclude coverage for pre-existing conditions for six months. Additionally, insurers couldn't consider health status in setting premiums -- they could only base rates on age, occupation, smoking status, family size and geographic location, just like current federal legislation proposes. Finally, they had to offer policies with standard minimum benefits, co-payments and coinsurance.
Then, in 2003, Maine set up a public plan called Dirigo Health, and provided subsidies for low and moderate income brackets, making coverage affordable. The state also expanded Medicaid to 200% of the poverty level for parents with children. It's sounding a lot like current legislation, isn't it? But here's the kicker: it did not include an individual insurance mandate. Maine residents had most of what we are now asking for: a public option, consumer protections, standard benefits and subsidies to make coverage affordable, but it did not require residents to purchase coverage. Guess what happened.
The uninsured population dropped by just 0.2% from 2005 to 2008. Basically unchanged. Compare Maine's 2007-2008 uninsured rate of 9.6% to Massachusetts's 5.4% (remember, Massachusetts instituted mandatory insurance coverage in 2006.) Since insurers were required to abide by consumer protection laws and take higher risk populations, but consumers weren't required to buy coverage, premiums skyrocketed. Until 2009, when the state pushed back, premiums regularly increased by over 10% annually. Do you see what was happening? The sicker folks were signing up because they had to afford coverage, while the healthy folks dropped out to save their money. Maine's insured population essentially became a high-risk pool.
Private insurers want their profits, so they also allegedly got clever and started dumping patients into the public plan, Dirigo Health. Patients themselves, over 3,000 people in all, switched from the state's largest private plan to Dirigo either for the more extensive benefits package or the subsidies. This adverse selection caused the state to exceed its cost projections, because it had to provide more subsidies than expected. Fewer small businesses enrolled than forecast too. The snowball rolled faster and faster downhill. The state is embroiled in a lawsuit with one of the country’s largest private insurers and going nowhere fast.
What can we learn from Maine's experience? First, we need individual and business mandates to make insurance markets work. Broad enrollment should mean lower premiums. Second, private insurers must be prevented from continued risk avoidance schemes that steer high-risk patients to public plans. Third, affordability means not only subsidies but actual strong cost controls. We at least need the mandate to take a first tentative step towards real reform.
Read more about Maine’s experience in a 2007 report by the Commonwealth Fund, Robert Woods Johnson Foundation, Academy Health and Mathematica.
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