Dear Governor | Thoughts on how new leadership can affect businesses' health care costs
Partner in the health care and administrative law practice at Preti Flaherty
The massive federal overhaul of our health care system, enacted this spring and known as the Affordable Care Act , takes effect between now and 2014, matching the term of Maine’s next governor. Given hundreds of pages of new federal statutes, it may seem that state government has little to do with the impact of health reform. Under the ACA, however, states have latitude in how to structure and control health care coverage and benefits. Maine’s next governor will therefore have considerable opportunity to affect the success and the cost of health reform in Maine.
By 2014, the ACA requires states to establish health insurance “exchanges,” through which individuals and small businesses can purchase standardized and readily comparable health insurance plans. The new law also provides substantial premium subsidies for persons of low and moderate income. All new plans are subject to significant consumer protections, designed to move the nation toward universal coverage and more price competition. Some protections mandated by the ACA are already part of Maine’s insurance law — for example, Maine has limitations on excluding individuals from health plan eligibility due to pre-existing illnesses or conditions, and on the extent to which rates can vary due to age or health status.
Maine’s next governor cannot leave our existing versions of these protections in place or simply copy the new federal standards indiscriminately. The ACA establishes a “floor” for these consumer protections, but in certain respects Maine’s current laws offer greater protections. The next governor must weigh the costs and benefits of continuing to provide stricter controls in Maine than those that will now be required of all states. Moving to the less restrictive ACA “floor” could yield lower premiums for some businesses. However, Maine’s stricter standards, with regard to community rating, for example, may benefit those employers with an older or higher-risk work force. As we approach the goal of universal coverage, a more aggressive approach to consumer protection may, over the long run, produce a healthier work force at lower social and employer cost.
How can Maine’s next governor balance these competing considerations and offer leadership toward the best solution for Maine’s businesses and their workers? The decision should not rest on short-run premium impacts alone, nor on theoretical differences in “competitiveness” derived from comparing benefit expenses in isolation. Even if we conform our regulatory policies to those of neighboring states, health benefit costs will not become the same here and across those borders. Health plans will still charge premiums based on the costs of providing care to their beneficiaries, which in turn depend on both the characteristics of the population served and the efficiency and outcomes of the health care delivery system. If Maine’s aggregate health care costs continue to be comparatively high, then the cost of health plans to Maine employers and their workers will continue to be as well. Changing the shape of insurance market regulation will affect who the winners and losers are among Maine’s employers, but it is far from clear that it will drive costs down on the whole without thoughtful and determined management toward that objective.
Defining the package of services covered by health plans will present another crucial series of decisions. If Maine retains benefit mandates that exceed the federally defined “essential health benefits,” federal premium subsidies will provide no support for the resulting incremental costs. Whether Maine’s existing mandates differ from “essential health benefits” remains unknown until federal regulations are adopted. If a gap exists, Maine must weigh the health benefits of its prior mandate decisions against the costs and subsidy shortfalls involved.
Still more choices await. States will decide whether to combine the small business and individual exchanges in a single marketplace. Maine may also have opportunities to join forces with other states, forming compacts to operate exchanges across state lines. These decisions require close attention to differences between the regulatory requirements and health care systems of the participating states.
The ACA is the most substantial restructuring of health care in the United States since the enactment of Medicare and Medicaid, and it holds the potential to help keep Maine’s work force healthy and productive at an affordable cost. The choices to be made by Maine’s next governor and Legislature, however, will affect how affordable and sustainable the newly expanded health care coverage turns out to be. Maine’s health care economy is characterized by unusually high costs and an unusually aged population. In addressing these challenges, the new governor, fortunately, will also find that Maine has a rich store of experience in exploring health reform strategies on its own. What we have learned from these state-based efforts can help us maximize the value to Maine of the enhanced federal support provided in the ACA.
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