Maine’s Health Insurance Reform is Showing Positive Impact

The Center for Health Reform Initiatives, a project of the Maine Heritage Policy Center, has released a new study on Maine’s health care reform law (PL90), Crisis to Cure: Maine’s Health Care Reform Law is Helping Business. In the study, health care policy expert and small business owner Joel Allumbaugh looks at three instances where real Mainers have reaped the benefits of increased choice, less regulation, and greater competition in the health insurance market.

As Allumbaugh writes in his study, “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.”

While the plural of anecdotes is not data, statistics from the Maine Bureau of Insurance (pdf) suggest the stories of these businesses and individuals reflect a broader trend in Maine’s health insurance market.

As the chart below shows, there has been a significant downward shift since the summer of 2011 – when PL90 became law – in the number of businesses experiencing rate increases greater than 20 percent. The chart also shows a rise in the number of businesses seeing a rate decrease, something unheard of before PL90.

Chart Showing Percentage of Groups by Quarter in Each Rate Change Band Critics of the law are fond of calling PL90 the “rate hike law.” But one thing worth keeping in mind when talking about health insurance rates is that increases are as inevitable as death and taxes. Increases to adjust for inflation, which is higher in the health care industry than elsewhere, increases for aging populations, for migration patterns, etc. have occurred every year in recent memory—and at much higher rates.

So while it may be technically correct—and rhetorically advantageous—to assert that a majority of businesses post-PL90 are experiencing rate increases, such claims are either disingenuous or ignorant to the nature and history of Maine’s health insurance industry.

Another important consideration is the impact of Obamacare. Any analysis of Maine’s changing health insurance market must consider the tsunami of new federal regulations – 15,000 pages and counting – that are increasing both the complexity and cost of providing health insurance.

Additionally, just because health insurance rates are going up does not mean health insurance costs are going up. Why? Because PL90 has opened the door for new health insurance products across a wide spectrum of prices. As such, businesses can move to another plan with lower prices and/or better options that did not exist before PL90.  Simply examining plan prices does not account for savings for this important “substitution effect.”

But despite the unavoidable upward pressure on insurance rates and the added burden of complying with Obamacare, PL90 is succeeding in its goals. Less than two years into its implementation, insurers are competing more than ever, and as a result Mainers are already seeing smaller premium increases and more health insurance options. This is the genius of the free market at work.