(Download the study here)

This study looks beyond the regulations to highlight the practical impact PL90 is having for end users, the businesses and consumers who purchase private health insurance in Maine.  This is a measure all too often dismissed by critics yet perhaps the only measure that truly matters.  The following case studies illustrate the effects of specific provisions of PL90.  Names have been altered for confidentiality purposes, but the profiles are of real companies and individuals. All material details presented in the case studies are accurately portrayed.

PL90 is demonstrating who truly benefits when we free our markets to respond to consumer needs, the many individuals and small businesses in Maine who rely on private health insurance—a 56 year old woman with a newly transplanted heart able to afford her anti-rejection medications, a small business lowering their cost rather than accepting a 23 percent rate increase, and another small business able to continue providing health insurance to its employees without having to ask them for a premium contribution.

Case Study 1: Improved Individual Market

Background:

PL90 contained numerous provisions aimed at improving Maine’s individual and small group health insurance markets.  The Maine Guarantee Access Reinsurance Association (MGARA) was created to subsidize high cost claimants in the individual health insurance market.[2]  MGARA assesses $4 per month from policyholders across all insurance markets in Maine raising approximately $25 million.  This fund is supplemented with premiums paid by insurers who have high cost individuals in the reinsurance pool.

Once an individual is designated to the reinsurance pool, MGARA reimburses the insurer after the first $7,500 of claims paid, 90 percent of the next $25,000 of claims paid, and 100 percent of claims paid in excess of $32,500.

MGARA is transparent to policyholders who are unaffected by the program in terms of their coverage and premium cost.  In most cases, policyholders are likely unaware that they are in the reinsurance pool.  Their plan choices are the same as any other policyholder and their premiums are the same as a healthy individual of the same age and gender.

Profile:

Jane Doe, a 56 year old single woman, worked for a small Maine employer who offered a group health insurance plan covering Jane and four additional employees.  In the fall of 2011, Jane suffered a massive heart attack.  The attack resulted in significant irreparable tissue damage and left Jane in and out of consciousness for months in an intensive care unit first in Maine and then a hospital in Boston.

She was eventually released after months of hospitalization with a pump surgically implanted in her chest that circulated her blood while she waited on the heart transplant list.  Jane overcame many odds simply by surviving, but she would not be returning to work.

During this timeframe Jane applied for and was approved for social security disability.   She must now wait two years before she can apply for Medicare.  Her employer generously maintained her group insurance coverage for the maximum timeframe allowed under the group insurer’s eligibility rules.  Because this is a small employer ineligible under the Consolidated Omnibus Budget Reconciliation Act (COBRA), Jane found herself needing to seek coverage in the individual insurance market.

Effect of PL90:

Jane’s biggest challenge in affording individual health insurance was out-of-pocket costs.  She had sufficient savings to cover her monthly premium cost but worried about the plans additional out-of-pocket expenses.  Many plans have deductibles and out of pocket limits in the thousands and occasionally in excess of $10,000 annually.

Jane was able, however, to purchase a new individual product offered by Anthem, compatible with a Health Savings Account (HSA), that limited her annual out-of-pocket exposure to $2,600.[3]  It has been years since Anthem, Maine’s largest individual major medical insurance provider, has introduced new products.  The individual market has been steadily deteriorating, raising alarms the market could collapse entirely.  The Maine Bureau of Insurance issued a white paper detailing this problem in 2000 which was updated in 2001.[4]

MGARA has breathed new life into the individual health insurance market.  A viable market attracts investment as has been demonstrated by Anthem who introduced this new HSA product in addition to a portfolio of new products Anthem refers to as “HealthChoice Plus”[5] with premiums as much as 72% lower than products previously available.[6]  Since MGARA became operational in July of 2012, Anthem saw new products sales increase approximately 60 percent over the same timeframe in 2011.[7]

PL90 created a more stable individual health insurance market.  The result was new investment by a Maine insurer that provided invaluable coverage for an individual in need.

Case Study 2: Substitution Effect

Background:

The small group health insurance market in Maine includes several insurers who compete for market share.  Because of this, it is typical for small companies to shop their insurance coverage each year to make sure they are getting the best price.  As an insurance broker, I can tell you that small companies change insurers and products frequently, sometimes literally on an annual basis.

PL90 not only instituted MGARA and changes to insurance rating rules, it also removed barriers to new products and investment.  One provision lifted a somewhat obscure Maine law that prohibited individual Health Maintenance Organization (HMO) deductibles in excess of $1,000.  As a result, multiple insurers offered new small group HMO products including Maine’s non-profit health insurer, Harvard Pilgrim Health Care.[8]

Profile:

ABC Architecture is a small firm in southern Maine with a dozen employees.  They offer health insurance to their staff of which ten participate.  Their plan renews each year on January 1^st.  This year they faced a 23 percent rate increase from their insurer which translated to a premium increase of over $8,300.

Effect of PL90:

As shown in Table 1, instead of a 23 percent rate increase, ABC Architecture experienced an 11 percent rate decrease saving the company over $4,000 over 2012, and over $12,000 compared to their premium cost had they renewed with their existing health insurance plan. ABC Architecture shopped as they do each year and changed to one of Harvard Pilgrim’s new HMO products.  The coverage was almost identical with only a $50 increase in their employee’s annual out-of-pocket exposure.  This was a Health Savings Account (HSA) compatible plan like their previous plan, but it included an enhanced prescription benefit.

The chart below, prepared by the Maine Bureau of Insurance, shows a growing trend of health insurance rate decreases rising from less than 3 percent before PL90 to 9.4 percent in 2011 and 17.5 percent in 2012.[9]  The percentage of small businesses experiencing increases dropped in every category and the substitution effect tells us that many more companies changed products or insurers to further mitigate costs.The substitution effect of companies changing insurance plans is an important aspect of the small group health insurance market.  It demonstrates that many companies change plans and insurers to avoid or mitigate rate increases.  Given that fact, when you see data regarding rate decreases, the numbers are invariably understated.

Case Study 3: Innovation

Background:

One PL90 provision enabled the formation of a health insurance captive which allows companies to band together to manage their health insurance expenses.  One group in Maine, the Maine Wellness Association, took advantage of this provision and formed a health insurance captive called MaineSense.[10]

MaineSense provides a new option for Maine companies with a number of unique features such as employer ownership in the program.

Profile:

XYZ Builders is a commercial building contractor in central Maine.  The company has provided health insurance to its 20 employees for many years.  They still pay 100 percent of the employee premium though rate increases are threatening their ability to continue doing so.

Effect of PL90:

Concerned about historical health insurance rate increases and interested in the opportunity to participate in what they viewed as an innovative new program, XYZ Builders joined MaineSense in January of 2012.  Doing so the company held their cost level with 2012 while improving their coverage.

PL90 created the opportunity for the Maine Wellness Association to launch a new program.  That new program translated to a choice for XYZ Builders that did not otherwise exist.  Not only did XYZ Builders enjoy participation in an innovative program of which they are now a part owner, they have experienced two years of equal or lower health insurance costs, an uncommon experience for a Maine small business.The employee single plan out-of-pocket limit fell from $3,500 excluding prescription out of pocket costs to $2,550 including prescription out of pocket costs.  January first of 2013, XYZ Builders renewed their plan unchanged with MaineSense at a 1% premium decrease.

Conclusion:

Creating viable, competitive health insurance markets should not be viewed as a “gift to insurance companies,” but instead should be recognized for what they truly are—a gift to the consumers who purchase through those markets.

When we focus on policies that stabilize our insurance markets, we see rates begin to stabilize, investment in new products, heightened competition, and innovative market entrants.  We also see a 56 year old woman with a newly transplanted heart able to afford her anti-rejection medications.  We see a small business lowering their cost rather than accepting a 23 percent rate increase.  We see another small business able to continue providing health insurance to its employees without having to ask them for a premium contribution.

PL90 is demonstrating who truly benefits when we free our markets to respond to consumer needs, the many individuals and small businesses in Maine who rely on private health insurance.

Notes and Sources

A case study from a real business in Maine, a commercial concrete business serving the construction industry, shows that providing health insurance benefits under Obamacare would result in an annual increase of almost $30,000.

Download full case study here (PDF)

Due to the requirements mandated by Obamacare, this small business would face a 27% increase in the cost of providing health insurance benefits. The business now pays a total of $109,022 a year to provide health insurance for its employees.

Under Obamacare, the business would pay $137,932—an annual increase of $28,910.

However, if this company chose to drop health coverage all together, the penalty that Obamacare would impose on the company would total between $60,000 and $110,000. Since that amount could be significantly lower than the cost of providing health insurance under Obamacare, the company may choose not to offer health insurance at all.

Furthermore, the case study does not account for the administrative costs the business would incur to manage Obamacare’s eligibility rules, which in this case would be quite significant.

It is unfortunate that America’s policymakers did not thoroughly vet Obamacare before enacting it to verify that its grandiose economic claims of lower health insurance costs and increased jobs were based in reality, said Joel Allumbaugh, author of the case study and director of the Center for Health Reform Initiatives at The Maine Heritage Policy Center.

Instead, Americans are now saddled with Obamacare and its unintended consequences, he said. This case study of a real company finds that Obamacare will actually mean higher health insurance costs to employers and, in the long run, fewer jobs. Liberty-loving Americans who value control of their own healthcare must demand that policymakers repeal Obamacare as soon as possible.

For more information about this case study or Obamacare, contact Joel Allumbaugh at jallumbaugh@mainepolicy.org.

RPS law burdens households, harms Maine’s economy 

Maine’s Renewable Portfolio Standard (RPS) legislation, which requires that some of the state’s electricity must be generated by expensive “renewable” sources, will increase the cost of electricity by $145 million within five years and will cost the state nearly 1,000 jobs.

According to the new study, “The Economic Impact of Maine’s Renewable Portfolio Standard,” the state’s electricity prices will surge eight percent by 2017, thanks to the RPS law.

That means homeowners will pay $85 more a year for electricity—and businesses will pay over $600 more a year—because proponents of “green energy” have mandated that a certain percentage of Maine’s electricity must come from wind power, solar and other “green” energy sources.

Hydropower is a clean, abundant, reliable and affordable form of “green” energy that is readily available to Maine. Using more hydropower could easily reduce electricity costs to consumers and businesses. But it is excluded as a source of “renewable energy” from RPS.

Owners of industrial businesses are hit the hardest by RPS, according to the study. Maine’s largest employers will see electricity costs increase by a staggering $14,350 per year because of the burdensome RPS law.

The study, published by The Maine Heritage Policy Center in partnership with The Beacon Hill Institute at Suffolk University in Boston, concludes that, “increased energy prices will hurt Maine’s households and businesses and, in turn, inflict significant harm on the state economy.”

Maine’s first RPS law was created in 1999 under former governor Angus King. The RPS law was then strengthened in 2006 under former governor John Baldacci. In 2007, King and Rob Gardiner, the former president of the Maine Public Broadcasting Network, formed a wind-energy company, Independence Wind.

As a result of the RPS, the study found that in five years Maine will suffer from:

• Reduced employment by 995 jobs

• Reduced real disposable income by $85 million, potentially as much $100 million

• Decreased investment by $11 million

Scott Moody, a co-author of the report and CEO at The Maine Heritage Policy Center, said the study shows exactly why energy reforms are necessary.

“RPS was a mistake, and we see now that it’s a law that will cost Mainers jobs and real money,” Moody said. “It’s clear that when we let political and personal agendas drive policy-making instead of free-market principles, we end up with fewer jobs and less money in the pockets of hard working Mainers.”

Click here to see the report.

PORTLAND – The Maine Heritage Policy Center today released a report saying that Maine should not expand its Medicaid coverage under Obamacare. States will have the option to add government-funded coverage for healthy individuals under 65 who are at 133% of the poverty level because of the controversial health care overhaul. Originally, the law sought to force states to expand Medicaid, but the Supreme Court threw out that requirement, giving states the option to deny the expansion without penalty.

In Maine, more than 25 percent of all residents are on Medicaid, and the MHPC report says that adding more enrollees to a system that is already too expensive would spell disaster. Despite Obamacare’s promise to initially cover 100 percent of expansion costs, the federal government has a track record of underfunding Medicaid expansions.

“When considering this ill-advised expansion plan we need to remember first and foremost that federal money is never free,” said the author of the report, MHPC’s Director of Health Reform Initiatives Joel Allumbaugh. “We are fooling ourselves if we pretend that federal money is anything other than our own tax dollars, despite what advocates for government-run health care will say.”

“Federal funding is also for eligibility expansion – not administrative costs,” Allumbaugh added. “Ultimately, Maine will bear the cost of administering a projected 37,000 new enrollees, most of which will translate to new permanent fixed administrative expenses.”

The study also showed that in Maine’s past Medicaid expansions the uninsured were not helped by the expansion, but instead, Maine residents dropped privately held insurance to go on taxpayer-funded plans. Maine’s uninsured rate is nearly the same as it was in 1999, while government-run health care enrollment has more than doubled in the same time period, from 10 percent of those insured to more than 23 percent in 2010.

“Governor LePage and his administration have made great strides to solve Maine’s health care challenges and reduce our dependence on government-run health care programs,” Allumbaugh said. “Pushing forward with Obama’s proposed Medicaid expansion would take Maine backwards, towards more government dependence. We can’t let this happen, Maine taxpayers and ratepayers deserve better.”

###

Read the full report online here

Download the full report here (PDF)

In making the announcement, MHPC Chairman Peter Anania said, “We are delighted to have Scott, who has a strong policy background, to lead our organization. Scott has directed our studies in tax and regulatory policy for six years, and he has excelled in that role. MHPC’s board, our staff and our many supporters across the state look forward to working with him to advance our common interests in free markets and a free society.”

Moody will replace Lance Dutson, who has resigned from MHPC to take a position in Charlie Summers’ campaign for U.S. Senate. Anania said of Dutson: “We thank Lance for his hard work in MHPC’s behalf. We understand his passion for elective politics, and we wish him well in his future endeavors.”

MHPC, a nonprofit and nonpartisan policy institute, is an influential voice for fiscal discipline and limited government across the state of Maine. MHPC conducts policy research, convenes citizen conferences, publishes the Internet news service The Maine Wire and promotes public policy in support of a free and prosperous Maine.

The people who chose to leave Maine from 1995 to 2009 took over $661 million in income to other states. The loss of that income has caused Maine state and local governments to lose at least $87 million in income taxes, sales taxes and property taxes.

The actual losses in income and taxes is much higher because its does not account for the compounding and multiplying effects of income over time. Every dollar that is spent often becomes $3 or $4 in total economic activity.

The report, “Maine Loses People and Their Income to States with No Personal Income Tax,” by Scott Moody, chief economist for MHPC, shows the desire of residents to migrate from Maine, which has the nation’s sixth-highest tax burden, to states with no income taxes.

“Opponents of eliminating Maine’s personal income tax will, quite predictably, lament the loss of state tax revenue,” said Moody. “However, the analysis clearly shows that the loss revenue is significantly lower than commonly assumed. The economic benefits of stemming, or even reversing, the out-flow of people and their income to states with no personal income tax would be a major boon to our economy.”

“These residents are voting with their feet, and they are taking over $44 million a year with them,” said Lance Dutson, CEO of The Maine Heritage Policy Center. “The evidence strongly suggests that eliminating the personal income tax would help level the playing field and give Maine a fighting chance to convince residents to stay put. Retaining these residents and their income would also help Maine’s small businesses and would create new jobs.”

Download full report here (PDF)

A report released today by the Maine Heritage Policy Center shows that Maine’s high-earning individuals are working married couples with dual incomes and risk-taking entrepreneurs who create jobs. This is in stark contrast to recent cries denouncing supposed “tax cuts for the rich” in response to modest income tax relief passed last year.

The report, Who are Maine’s “Rich?” profiles various levels of income tax filers, and shows that those earners who are in the higher categories are primarily families and small business owners. Mainers who earn $200,000 or more are primarily married (86.6%) and many are business owners (45.2%). Because of the higher income, often a result of business income that is held to cover liabilities and make business investments, these so-called “rich” pay higher effective tax rates than filers who earn less.

“This report shows how important a reduced income tax burden is to hard-working Maine families and small businesses,” said Scott Moody, the Chief Economist for the Maine Heritage Policy Center. “The big government advocates on the left are yelling about tax cuts for the “rich” but what they don’t seem to understand is that the people helped most by income tax reductions are entrepreneurs who create jobs.”

The study uses a hypothetical situation of two different taxpayers – one is single and makes $50,000 and the other is a family of four who has two incomes, some business income, and some capital gains totaling $175,000. In this scenario, the “rich” taxpayer is taxed on $50,000 in business “profits” that won’t actually be received by the individual, but will instead be invested back into the company. Still, this business income, combined with the dual incomes of husband and wife, leave the “high-income” taxpayer with a 9.9% tax burden as percent of actual income, while the single taxpayer, earning $50,000, has a tax burden of just 5.7%.

“What we see consistently is that folks who are taxed at higher rates for their earnings are the very people we rely on to create jobs and move our economy forward,” said Moody. “When the Governor and Legislature did the smart thing and gave these job creators much needed tax relief, the calls came out from the left to “tax the rich” – well I have news for them, the “rich” are Maine small businesses and hard working families.”

__________________________________________________

For more information or to schedule an interview, please contact Peter Steele at psteele@mainepolicy.org or by calling 207-321-2550.

RPSPresentationMHPC 2012-2-16

A study released today finds that allowing workers to decide whether or not to join a union can be great for a state’s economy. The report from The Maine Heritage Policy Center  (MHPC) shows that Mainers are leaving the state and moving to “Right-to-Work” states, or states where workers cannot be forced to join or financially support a labor union a t their place of employment.

According to the report, 15,694 Maine households, representing nearly 25,000 Mainers, moved from Maine to Right-to-Work states between 2003 and 2008. This out-migration of Maine workers represents $801 million in adjusted gross income.

On the other side of the spectrum, Oklahoma, since becoming a Right-to-Work state in 2003, has seen growth in population, gaining nearly 41,000 people and $99 million in income from 2003 to 2008 alone. Of the new Oklahoma residents, 31,367 relocated from non-Right-to-Work states. Before passing Right-to-Work, Oklahoma had lost 10,681 households representing $1 billion in income between 1995 and 2002.

“What is clear from the Oklahoma example is that Right-to-Work states are attracting new business, new residents and economic growth,” said Scott Moody, Chief Economist for The Maine Heritage Policy Center. “Maine has suffered from ‘brain drain’ and out-migration to Right-to-Work states for many years, and this study shows us one reason why – Right-to-Work states are providing better economic opportunity than we are.”

Additionally, the report found that by instituting Right-to-Work in Oklahoma, the GDP of the manufacturing industry, a staple of Oklahoma’s economy, increased by 45 percent from 2003 to 2010. This growth can be directly attributed to an increasingly productive workforce.

“Maine has a great opportunity to make a move that will undoubtedly boost our economy without costing taxpayers or government a dime,” said Moody. “By implementing Right-to-Work here in Maine, we are opening the door to increased workforce productivity and less out-migration of Mainers to Right-to-Work states.”

“For too long, forced unionization has held back economic growth in Maine,” said Lance Dutson, CEO of The Maine Heritage Policy Center. “This study demonstrates just how damaging that can be to the workforce and our population. It’s time to protect our workers individual liberty and open the door to economic prosperity by bringing Right-to-Work to Maine.”

Download the full report here (PDF)

Today, MaineOpenGov.org has been updated and expanded to show five years of salary and benefits data for employees of the Maine State Housing Authority (MSHA). The data from Maine Housing was provided in response to a Freedom of Access Act request made by The Maine Heritage Policy Center (MHPC). The data shows that in the past five calendar years (2005 – 2010) total payroll and benefits costs of Maine State Housing Authority employees grew by 30%, from $7,119,528 in 2005 to $9,370,550 in 2010. Current MSHA Executive Director, Dale McCormick, took over as head of MSHA in 2005.

Maine State Housing Authority Total Payroll Cost 2005 – 2010

“We’re excited to add another, brand new set of payroll data to MaineOpenGov.org,” said Sam Adolphsen, Director of Open Government at MHPC. “The Maine State Housing Authority handles a great deal of public money, and is responsible for providing critical services for our most vulnerable citizens. It’s vital that their operations are transparent, and that they are accountable to taxpayers for how they spend those public funds. This is particularly important at a time when 6,500 of our fellow Mainers find themselves on the waiting list for affordable housing.”

Other key findings from the MSHA payroll data include:

• Over the same time period (2005 – 2010) Maine State Housing Authority Payrolls have more than doubled the total payroll increases at the Maine Turnpike Authority, Maine State Government and the University of Maine System total payrolls.