Just three years after its ambitious launch, some say it's time to pull the plug on Maine's DirigoChoice health insurance program

Hildie Lipson is crossing her fingers that DirigoChoice enjoys a long, healthy life. Lipson runs the Augusta nonprofit MaineShare, which raises money for charitable organizations, with one full-time worker. She enrolled in the state-run health insurance program, DirigoChoice, in January after Anthem Blue Cross and Blue Shield of Maine boosted rates on the plan she held — a plan with a $350 per month premium with a $250 deductible. Lipson says she had to ask her insurance broker to quote DirigoChoice after the broker presented several options from private insurers. Months later, Lipson says she's happy with her unsubsidized, $436 per month, $1,250-deductible plan, the premium for which is paid by the nonprofit she runs.

"I don't really understand why people don't want this to succeed," Lipson, 46, says of the plan's critics. "They'll say it doesn't have a future and they don't see a need for it. I feel it has to succeed. I think we really need it."

But Dirigo, which last year was named one of the "Top 50 Government Innovations" by Harvard University's Kennedy School of Government, may not live to see its fifth birthday. When it was launched on Jan. 1, 2005, Gov. John Baldacci predicted the program would provide health insurance to 130,000 Mainers by 2010. But DirigoChoice, which to date has enrolled roughly 10% of that goal, is expected to run out of money in February 2009 unless its rich benefits package is trimmed or funding is altered.

On Sept. 17, Acting Superintendent of Insurance Eric Cioppa granted DirigoChoice $32.8 million in funding, less than half of the amount requested by the Board of Directors of the Dirigo Health Agency, the office that administers the DirigoChoice program. In his written decision on the matter, Cioppa said it would be "more feasible and more desirable" if the agency's method of calculating the savings offset payment — which charges private healthcare providers and insurers a fee for the bad debt and charity care the Dirigo program says it saves the system — were altered to be more reliable. On July 1, after the Legislature failed to agree on Dirigo reform, DirigoChoice was forced to suspend subsidized enrollment.

"It was regarded as a death knell," says Sen. Peter Mills (R-Skowhegan), of the superintendent's funding decision. Mills, the former Republican leader of the Committee on Insurance and Financial Services who has followed Dirigo since its inception, says the upcoming legislative session is a do-or-die test for Dirigo. And he says Dirigo has so divided the Democrats and Republicans who once collectively voted for it, he's not confident the program can be salvaged.

"I don't see the left being willing to change the product to any extent, and I don't see the right being willing to raise a nickel for it," Mills says.

Dirigo enthusiasts say they're optimistic about the program's future, but both sides agree the challenge is one of money and mentality. Some say Dirigo is an important step in pushing Maine's already relatively low percentage of uninsured even lower. But others believe it's time to face facts: Dirigo is dead.

The case for Dirigo

Don't start writing the eulogy yet.

After all, DirigoChoice is — brace yourself — successful.

Contrary to what you may have heard, the majority of Dirigo enrollees, 65%, were either uninsured or underinsured (meaning their insurance never kicked in because of thin benefits or high deductibles), according to the Dirigo Health Agency's 2005/2006 Annual Report. And while enrollment of sole proprietors and businesses with 50 employees or fewer together account for about half of Dirigo enrollees — the rest are individuals — this rate of small-business enrollment is higher than that of any other comparable state-run health insurance program in the country, according to an August 2006 study by the Institute for Health Policy at the University of Maine's Muskie School of Public Service in Portland.

The typical subsidized Dirigo member lands squarely in the income category the plan hoped to target — working Mainers who make too little to afford adequate private health insurance but too much to qualify for MaineCare, the state's Medicaid program. The average subsidized Dirigo household contains two people and makes $15,144 a year — about $1,500 more than the MaineCare income limit for households with two adults. Dirigo is designed to subsidize health insurance for those employees who make up to 300% of the federal poverty level ($30,630 for a single adult) at a sliding scale rate of up to 80% of the premium until those employees move to jobs that pay enough to afford private insurance or the unsubsidized Dirigo plan, explains Trish Riley, director of the Governor's Office of Health Policy and Finance, the office overseeing the Dirigo Health Agency.

While Dirigo didn't hit the governor's first year enrollment goal of 31,000 — a figure many observers now admit was unrealistic — it still enrolled at a faster rate than the early years of similar programs targeting small businesses and the working poor in New York, Washington and New Mexico, according to the Muskie School. Even since the enrollment freeze announced in July — which prohibits new subsidized enrollees but allows unsubsidized members, dependents of current members and employees of current members — the program has enrolled 130 new people, according to Riley.

Not only have Mainers embraced this new, heavily criticized program at a rate faster than peers in other states, those who have enrolled have stuck with the program, which offers one of the best benefits packages and lowest deductibles available in the Maine market. (For more on how plans compare, see the chart on page 20.) In 2006, according to Dirigo's figures, 93% of members who were eligible to renew did. Dirigo is, in fact, the fastest-growing insurance policy ever offered in Maine, according to an April article in BusinessWeek magazine, and the program contributed to a decrease in the uninsured in Maine from 2001 to 2005. Maine was the only state in the country to lower its percentage of uninsured during that time, according to BusinessWeek.

"I was approached by two other people who offer health insurance — agents," says Jan Barrett, 60, owner of the Ware Street Inn in Lewiston and a subsidized Dirigo member since 2005. "Both of them could not give me the kind of benefits for less money or the same money as Dirigo. It is helping people out there who otherwise would not be able to get insurance. It is helping us. But I don't read anything out there about that."

Dirigo on life support

But for every person cheering DirigoChoice, there is someone else saying the program is on life support.

Dana Connors, president of the Maine State Chamber of Commerce, sat on the Dirigo Health Agency's Board of Directors from late 2003 until this September. Since 2005, Connors has also been a plaintiff in several lawsuits against the Dirigo Health Agency on behalf of the Maine Chamber of Commerce; at least one of the lawsuits is still pending. The chamber has alleged since the start of the program that the state's method of calculating savings offset payments is theoretical and flawed. Connors, who commends the intentions behind DirigoChoice, is convinced the program is "at a point where something needs to be done."

Connors says Dirigo has not met its goals to significantly reduce bad debt and charity care, and the state has yet to lay out a clear way to measure savings the program supposedly creates. Dirigo's problems contributed to Connors' decision to contact Anthem Blue Cross and Blue Shield during the winter of 2005 to come up with another insurance option for small businesses. The result, Chamber BlueOptions, was launched in January and offers five plans with premiums ranging in price from roughly $200 per month to upwards of $400. The program has to date enrolled roughly 3,000 people, about 20% of whom were previously uninsured, according to Mark Ishkanian, director of corporate communications for Anthem in Maine. (For more on Chamber BlueOptions, see "Calling all employers," Sept. 17, 2007.)

Chris Hall, senior vice president of government affairs for the Portland Regional Chamber of Commerce, estimates less than one percent of the Portland chamber's roughly 1,500 members are enrolled in DirigoChoice. Hall doesn't plan to advocate during the upcoming legislative session to fix Dirigo, saying he believes health insurance should be the purview of the free market. To this end, Hall is pushing for a bill carried over from the last session, LD 1760, which would allow private insurers to charge premiums up to 150% higher than the average to a pool of high-risk clients that could include smokers, the elderly and those who work in dangerous industries. Hall contends clustering Mainers most likely to need care will allow private insurers here to offer lower premiums to the rest of us.

"Certainly this organization believes that private market insurance is a better solution than having the state provide some sort of universal, single-payer, everybody-gets health insurance," says Hall.

Market reform bills like LD 1760 intend to lower the cost of premiums in Maine by allowing insurers to deny or limit policies to Mainers based on health history, or charge higher premiums to high-risk members. Maine currently has several laws on the books that critics say bind the hands of the free-market, including restrictions on the price of premiums insurers charge and the information insurers collect on potential customers, as well regulations prohibiting insurers from denying coverage.

LD 1760, Hall's bid for market reform, faces an uphill battle: On Oct. 30, the Insurance and Financial Services Committee sent the bill to the Legislature with an "ought not to pass" stamp on its head. Opponents like the Augusta nonprofit Consumers for Affordable Healthcare say the state will end up subsidizing premiums for those in the high-risk pool, leaving private insurers to operate in a state-buoyed safety zone that robs Maine of the very free-market Hall is after.

Sen. Peter Mills, who since Dirigo was launched has gone from the plan's supporter, to its critic, to its detached ex, in 2006 wrote a "seven-point prescription to cure Dirigo." In it, Mills calls the program "tiny and ineffectual" and lays out ways to improve Dirigo immediately, including limiting enrollment to those who have been uninsured for at least six months, requiring an asset test to ensure the rich are not abusing Dirigo and opening the program to all private insurers who want to offer it. His boldest idea? Get rid of the savings-offset payments and fund Dirigo outright.

"The big question is how to fund Dirigo if we cease taxing the rest of the health care system through the [savings offset payment]," Mills wrote. "A suitably spare program can be supported effectively without a great deal of money …If a new source of revenue is needed it should be a tax similar to the cigarette tax, one that enhances public health."

Mills says his suggestions never gained steam in Augusta because the left doesn't want to eliminate benefits to make DirigoChoice more affordable and the right isn't keen on taxing to support it. This session, Mills plans to push for insurance market reform, like high-risk pools.

"It plainly does not scale," Mills recently said of Dirigo's funding formula. "You can't get between 15,000 or 20,000 insured [with Dirigo] without bankrupting the system. It proves that Maine is not able to solve this problem, at least in that way."

Searching for sustainability

In early September, Anthem Blue Cross and Blue Shield of Maine, the South-Portland based insurer that since Dirigo's launch had administered the DirigoChoice program, cut ties with Dirigo because, as Anthem spokesman Ishkanian explains, "we simply couldn't agree on financial terms where we felt the risk was shared proportionally between Anthem and the state." (This January, Anthem will launch Employee Elect, a new health insurance program for small businesses.)

Within days of Anthem opting not to renew its Dirigo contract, the state announced Massachusetts nonprofit insurer Harvard Pilgrim Health Care agreed to administer the plan starting Jan. 1, 2008. Bob Downs, director of operations at Harvard Pilgrim, says the plan won't change under Harvard apart from the rate increases the state recently granted of two percent on small group DirigoChoice premiums and 17% for individual premiums. Harvard's contract with Dirigo also eliminated commission payment to insurance brokers, which likely means many will no longer quote the plan even for renewals, a change health policy and finance director Riley says won't significantly affect enrollment since many Dirigo members contract directly with the insurer or through the Dirigo Health Agency.

Downs readily admits Dirigo won't be a moneymaker for Harvard — he predicts a first-year profit from the plan of between zilch and half a percent — but the program does allow Harvard to roughly double its membership in Maine. Harvard is contracted to administer DirigoChoice for one year, with a one-year extension, and Downs says the company will assess with the Dirigo Health Agency in two years whether Harvard will continue.

"The key here is, can Dirigo secure a sustainable funding source to support its mission?" says Downs. "We think it's important to find a more sustainable source of funding that's broad-based."

Dirigo's budget is supplemented by revenue from the insurance program's annual $150 fee and the remains of a $53 million appropriation from the state general fund in 2003. But the bulk of the program's income comes from the controversial savings offset payment. Riley reminds Dirigo naysayers that there is still "a law on the books" requiring the savings offset payment be reassessed each year, though she recognizes the program's future is in jeopardy unless a more acceptable form of funding is found. For this, legislators will have to put aside their differences to resuscitate Dirigo.

"[Funding] certainly has been a contentious area," Riley says. "But the goal is to make employer-based coverage more available. The way we're going to achieve our end is to have everybody come back to the table and figure out a way to finance this program."
Hildie Lipson, the DirigoChoice enrollee from Augusta, says she's seen DirigoChoice save a local business — a close friend of Lipson's who is self-employed recently underwent open heart surgery. Had he not had Dirigo, with its low deductible and comprehensive coverage, Lipson says he "would have been financially ruined."

Does she worry about the program's survival?

"I'm not worried about that," Lipson says. "I'm very optimistic about its future, whether that's from knowledge or wanting to be optimistic. I want to see this succeed. I know that it needs to succeed."