January 19, 2004
Waiting for Dirigo | As the state assembles its landmark health program, small businesses wonder if its insurance plan can be competitive
By Sean Donahue
Health care isn't just a casual interest for Ruth Lawson-Stopps ˆ she calls it her passion, as well as her job. During a 30-year career in the industry she's worked as a clinician, data analyst and administrator in various health care institutions, and she helped develop, and became a partner in, Occupational Health Associates in West Bath, which treats workplace injuries. She's also been involved in Maine's decade-long struggle with health policy issues, working as a consultant with the Maine Health Care Reform Commission, chartered in 1992 to study health insurance reforms. And since becoming a small business manager, she's been committed to providing health insurance for her 25 employees.
It's not surprising, then, that she's had more than a casual interest in the development of the state's Dirigo Health program, created by Gov. John Baldacci's Office of Health Policy and Finance and passed by the Legislature last June. During the debate that led to Dirigo's creation, Lawson-Stopps agreed with reformers who called for comprehensive changes to the state's health care landscape. She says she wants to support the Dirigo health insurance plan now under development, because she knows it will need small business participants to be successful.
But while she's a supporter of Dirigo in concept, she's not ready to sign up for Dirigo the product. "When [the final plan] comes along, I'm going to have to sit down, look at the costs and benefits and compare it to what we have, because I'm still running a business," says Lawson-Stopps.
As Lawson-Stopps' hesitation illustrates, the unknowns still surrounding Dirigo Health stump even Mainers intimately familiar with the health care industry. And because of the nature of the program ˆ which is attempting to address the chronic problems of uninsured citizens and rising health care costs ˆ much of the ongoing discussion about Dirigo's potential merits and flaws actually consists of broad ideological debates, such as what role, if any, the state should play in the health care industry.
The problem at the moment is that most of the program's big questions can't be resolved until Dirigo is a functioning entity, its impact concrete and measurable. So rather than expend more energy on academic arguments, it may be better to ask what, exactly, that entity will look like.
As it turns out, Dirigo's health insurance component, stripped of its ideological context, resembles nothing so much as a new business trying to launch its first product. At a basic level, Dirigo's framers know they have to take the same steps as any business trying to increase its chances for success.
To that end, Baldacci last fall appointed the Dirigo Health Agency Board of Directors (see "The big picture," page 23) whose first responsibility was to oversee the development and pricing of a benefits package aimed at businesses with fewer than 50 employees, with a goal of launching the product by July 1. To help it do that, the board has hired staff with experience with startups as well as with private health insurance providers; it has turned to market research firms and consultants to help design the product; and in February it plans to look for a private insurer as a business partner to help sell the plan. The startup capital comes from a lump-sum $53 million fiscal relief payout from the federal government that Baldacci has set aside to create the Dirigo plan and fund the program during its first year.
Though it might be an overly simplistic way to look at Dirigo, the strength of that core enterprise, and how well it designs its first product, will have a significant bearing on Dirigo's broader goals and reforms. The entire plan depends on the small business community embracing the Dirigo insurance product ˆ a fact the Dirigo board seems to be taking seriously. "It's not difficult to come up with an insurance plan, but to come up with one that balances costs and improves access to health care is difficult," says Dr. Robert McAfee, a retired surgeon and chairman of the board of the Dirigo Health Agency. "We have to look at what plans are out there, and rely on consultants and researchers to see what the market really, truly wants."
A business plan and market research
Earlier this month, the Dirigo Health Agency began assembling its executive management team by appointing Tom Dunne, a retired partner with the global consulting firm Accenture, its executive director; Karynlee Harrington, a former vice president of sales and customer support for Cigna, was named director of sales and marketing. Dunne had been serving as interim executive director since last fall, and the board cited his 20-years experience in health and financial services companies, as well as his hands-on experience at startup operations, as reasons for making the appointment permanent. Dunne has already helped create the Dirigo organizational chart and written a business plan for the agency, and Harrington will design and implement a marketing plan to help launch the small business insurance product later this spring.
But like any serious business trying to launch a product, Dirigo's first step was to conduct market research among its target audience. Last December, the board hired political research firm Lake Snell Perry & Associates of Washington, D.C. to conduct six focus groups across the state, interviewing about 30 small business owners, as well as uninsured individuals and employees, about what they'd want in an insurance plan, and what they'd be willing to pay. The goal, says Dunne, is not just to offer the cheapest insurance plan possible ˆ a model that often makes up for its low up-front costs with high deductibles and copayments ˆ but to design the best blend of comprehensive coverage and affordability. "We're asking ourselves, 'What's our innovative edge?'" says Dunne. "We're not just trying to match the market, we're trying to meet the innovative edge with two or three key things to make Dirigo different."
Premium costs, though, remain the first ˆ and sometimes last ˆ thing some small business owners will look at, and at least one Dirigo focus group participant balked at the hypothetical prices presented to her. Margaret Fenderson owns Maine Lubrication Service, with 75 employees in Westbrook and Bangor, and is an admitted Dirigo opponent who fears the possibility of Maine moving toward what she calls the "disastrous" state-run health care system of her native Canada. But she also says the proposed plans she saw would end up costing her nearly twice the monthly $120 per-employee she pays for her health plan now. "The only way to make this system pay for itself is to get businesses to join, but do you think I'm going to join something that costs twice as much as I'm paying now?" asks Fenderson.
The Dirigo Health Agency would not discuss hypothetical costs or any other details of the focus groups, saying that the final report is expected in February. But McAfee said preliminary results from the studies showed him that while price remained the primary concern for most business owners, they also were interested in a benefits package that emphasized health promotion and disease prevention ˆ the type of plan that Dirigo is attempting to create. Once the board receives the final report from the focus groups, it will rely on experts from the global benefits consulting firm Mercer Human Resource Consulting to translate those opinions and preferences into a final benefits package.
Marketplace changes and competition
Until that benefits package is finalized, the Dirigo Health Agency won't know exactly how much its plan will cost small businesses. The ultimate price also will likely depend on feedback from private insurers, who in February will be asked to submit bids to offer the Dirigo plan alongside their own insurance products. Given the time required to create the request for proposals, and to review bids and negotiate with a potential partner about the cost to carry the plan, Dunne figures that Dirigo won't be able to unveil the final benefits package and price until April.
But even as Dirigo juggles deductibles, copayments and other financial elements of a health insurance plan, the board knows that its annual premium must at least fall in the ballpark of $3,000-$3,200, says McAfee. That's the range highlighted in a market study presented to the Dirigo board by Gino Nalli, a researcher with the University of Southern Maine's Muskie School of Public Service, which looked at the current state of Maine's insurance market and how it has changed over the last two years. Among the most significant changes Nalli noted was the arrival of new, lower-priced insurance plans aimed at small businesses, such as the Chamber Blue Choice Health Plan, a new product developed by the Portland Regional Chamber and Anthem. The plan charges an estimated annual premium of about $3,200 ˆ compared to about $5,000 for a standard Anthem plan ˆ and uses employer-funded medical savings accounts to help offset the cost of deductibles.
Those marketplace shifts raise other startup questions for Dirigo the business venture: Is the market's need for Dirigo as acute now as it has been in recent years? And how tough will the competition be for small business customers? Besides the new, lower-cost products on the market, many businesses have seen premiums for their existing plans stay flat this year or rise only a percentage point or two ˆ which, compared to the 20%, 30% or even 50% annual premium hikes seen in the last few years, may seem just as good as a discount to some small business owners.
"Changing your health insurance is a difficult process," says Lawson-Stopps. "A business owner who didn't have a big increase this year might say, 'Phew, I can handle that. I'm happy with my plan and it's one less thing I have to think about.'"
In response to the threat of inertia, Dunne and McAfee point out that Dirigo's goal is to provide a better health insurance value ˆ better coverage, lower copayments and deductibles ˆ and not just the lowest cost. At the same time, though, some small business owners may be turned off by mandates in the law that created Dirigo ˆ such as requiring a company to pay up to 60% of an employee's premium and extending benefits to some part-time workers ˆ that aren't required with private insurance plans. Though comparing the costs and benefits of various health plans is no one's idea of fun, the past several years of exploding health insurance costs have made most Maine business owners savvy insurance shoppers, unlikely to make their decision based on a single factor.
But simply comparing Dirigo to other insurance products misses many of the potential benefits the plan could offer, says David White, the owner of MDI Imported Car Service in Bar Harbor and a member of the Maine Quality Forum, a committee created by the Dirigo Health Reform Act to study health care best practices. White argues that Dirigo's steps to reduce the number of uninsured and control health care costs could have a broad economic impact that benefits even businesses that don't buy the Dirigo insurance plan. "This is not about putting out another insurance product," says White. "If we can get a hold of health care costs we'll have a genuine economic stimulus package, one that addresses job creation, tax relief and higher wages in one fell swoop."
That argument, of course, sends the debate back into the universe of big picture impacts and long-term goals of the Dirigo Health Reform Act. Business owners and other observers waiting for something concrete from Dirigo will have to look to the benefits plan and price coming later this spring. But even then, Dunne promises that Dirigo will continue to tweak the plan based on market conditions, customer feedback and how well the plan is meeting its broader goals ˆ which to some business owners signals that the Dirigo debate is far from over. "This is the pause in the action," says Lawson-Stopps. "I think Dirigo is going to be an evolutionary process, so there's nothing to do now but wait and give the folks time to develop it, then see how it changes from there.
It's not surprising, then, that she's had more than a casual interest in the development of the state's Dirigo Health program, created by Gov. John Baldacci's Office of Health Policy and Finance and passed by the Legislature last June. During the debate that led to Dirigo's creation, Lawson-Stopps agreed with reformers who called for comprehensive changes to the state's health care landscape. She says she wants to support the Dirigo health insurance plan now under development, because she knows it will need small business participants to be successful.
But while she's a supporter of Dirigo in concept, she's not ready to sign up for Dirigo the product. "When [the final plan] comes along, I'm going to have to sit down, look at the costs and benefits and compare it to what we have, because I'm still running a business," says Lawson-Stopps.
As Lawson-Stopps' hesitation illustrates, the unknowns still surrounding Dirigo Health stump even Mainers intimately familiar with the health care industry. And because of the nature of the program ˆ which is attempting to address the chronic problems of uninsured citizens and rising health care costs ˆ much of the ongoing discussion about Dirigo's potential merits and flaws actually consists of broad ideological debates, such as what role, if any, the state should play in the health care industry.
The problem at the moment is that most of the program's big questions can't be resolved until Dirigo is a functioning entity, its impact concrete and measurable. So rather than expend more energy on academic arguments, it may be better to ask what, exactly, that entity will look like.
As it turns out, Dirigo's health insurance component, stripped of its ideological context, resembles nothing so much as a new business trying to launch its first product. At a basic level, Dirigo's framers know they have to take the same steps as any business trying to increase its chances for success.
To that end, Baldacci last fall appointed the Dirigo Health Agency Board of Directors (see "The big picture," page 23) whose first responsibility was to oversee the development and pricing of a benefits package aimed at businesses with fewer than 50 employees, with a goal of launching the product by July 1. To help it do that, the board has hired staff with experience with startups as well as with private health insurance providers; it has turned to market research firms and consultants to help design the product; and in February it plans to look for a private insurer as a business partner to help sell the plan. The startup capital comes from a lump-sum $53 million fiscal relief payout from the federal government that Baldacci has set aside to create the Dirigo plan and fund the program during its first year.
Though it might be an overly simplistic way to look at Dirigo, the strength of that core enterprise, and how well it designs its first product, will have a significant bearing on Dirigo's broader goals and reforms. The entire plan depends on the small business community embracing the Dirigo insurance product ˆ a fact the Dirigo board seems to be taking seriously. "It's not difficult to come up with an insurance plan, but to come up with one that balances costs and improves access to health care is difficult," says Dr. Robert McAfee, a retired surgeon and chairman of the board of the Dirigo Health Agency. "We have to look at what plans are out there, and rely on consultants and researchers to see what the market really, truly wants."
A business plan and market research
Earlier this month, the Dirigo Health Agency began assembling its executive management team by appointing Tom Dunne, a retired partner with the global consulting firm Accenture, its executive director; Karynlee Harrington, a former vice president of sales and customer support for Cigna, was named director of sales and marketing. Dunne had been serving as interim executive director since last fall, and the board cited his 20-years experience in health and financial services companies, as well as his hands-on experience at startup operations, as reasons for making the appointment permanent. Dunne has already helped create the Dirigo organizational chart and written a business plan for the agency, and Harrington will design and implement a marketing plan to help launch the small business insurance product later this spring.
But like any serious business trying to launch a product, Dirigo's first step was to conduct market research among its target audience. Last December, the board hired political research firm Lake Snell Perry & Associates of Washington, D.C. to conduct six focus groups across the state, interviewing about 30 small business owners, as well as uninsured individuals and employees, about what they'd want in an insurance plan, and what they'd be willing to pay. The goal, says Dunne, is not just to offer the cheapest insurance plan possible ˆ a model that often makes up for its low up-front costs with high deductibles and copayments ˆ but to design the best blend of comprehensive coverage and affordability. "We're asking ourselves, 'What's our innovative edge?'" says Dunne. "We're not just trying to match the market, we're trying to meet the innovative edge with two or three key things to make Dirigo different."
Premium costs, though, remain the first ˆ and sometimes last ˆ thing some small business owners will look at, and at least one Dirigo focus group participant balked at the hypothetical prices presented to her. Margaret Fenderson owns Maine Lubrication Service, with 75 employees in Westbrook and Bangor, and is an admitted Dirigo opponent who fears the possibility of Maine moving toward what she calls the "disastrous" state-run health care system of her native Canada. But she also says the proposed plans she saw would end up costing her nearly twice the monthly $120 per-employee she pays for her health plan now. "The only way to make this system pay for itself is to get businesses to join, but do you think I'm going to join something that costs twice as much as I'm paying now?" asks Fenderson.
The Dirigo Health Agency would not discuss hypothetical costs or any other details of the focus groups, saying that the final report is expected in February. But McAfee said preliminary results from the studies showed him that while price remained the primary concern for most business owners, they also were interested in a benefits package that emphasized health promotion and disease prevention ˆ the type of plan that Dirigo is attempting to create. Once the board receives the final report from the focus groups, it will rely on experts from the global benefits consulting firm Mercer Human Resource Consulting to translate those opinions and preferences into a final benefits package.
Marketplace changes and competition
Until that benefits package is finalized, the Dirigo Health Agency won't know exactly how much its plan will cost small businesses. The ultimate price also will likely depend on feedback from private insurers, who in February will be asked to submit bids to offer the Dirigo plan alongside their own insurance products. Given the time required to create the request for proposals, and to review bids and negotiate with a potential partner about the cost to carry the plan, Dunne figures that Dirigo won't be able to unveil the final benefits package and price until April.
But even as Dirigo juggles deductibles, copayments and other financial elements of a health insurance plan, the board knows that its annual premium must at least fall in the ballpark of $3,000-$3,200, says McAfee. That's the range highlighted in a market study presented to the Dirigo board by Gino Nalli, a researcher with the University of Southern Maine's Muskie School of Public Service, which looked at the current state of Maine's insurance market and how it has changed over the last two years. Among the most significant changes Nalli noted was the arrival of new, lower-priced insurance plans aimed at small businesses, such as the Chamber Blue Choice Health Plan, a new product developed by the Portland Regional Chamber and Anthem. The plan charges an estimated annual premium of about $3,200 ˆ compared to about $5,000 for a standard Anthem plan ˆ and uses employer-funded medical savings accounts to help offset the cost of deductibles.
Those marketplace shifts raise other startup questions for Dirigo the business venture: Is the market's need for Dirigo as acute now as it has been in recent years? And how tough will the competition be for small business customers? Besides the new, lower-cost products on the market, many businesses have seen premiums for their existing plans stay flat this year or rise only a percentage point or two ˆ which, compared to the 20%, 30% or even 50% annual premium hikes seen in the last few years, may seem just as good as a discount to some small business owners.
"Changing your health insurance is a difficult process," says Lawson-Stopps. "A business owner who didn't have a big increase this year might say, 'Phew, I can handle that. I'm happy with my plan and it's one less thing I have to think about.'"
In response to the threat of inertia, Dunne and McAfee point out that Dirigo's goal is to provide a better health insurance value ˆ better coverage, lower copayments and deductibles ˆ and not just the lowest cost. At the same time, though, some small business owners may be turned off by mandates in the law that created Dirigo ˆ such as requiring a company to pay up to 60% of an employee's premium and extending benefits to some part-time workers ˆ that aren't required with private insurance plans. Though comparing the costs and benefits of various health plans is no one's idea of fun, the past several years of exploding health insurance costs have made most Maine business owners savvy insurance shoppers, unlikely to make their decision based on a single factor.
But simply comparing Dirigo to other insurance products misses many of the potential benefits the plan could offer, says David White, the owner of MDI Imported Car Service in Bar Harbor and a member of the Maine Quality Forum, a committee created by the Dirigo Health Reform Act to study health care best practices. White argues that Dirigo's steps to reduce the number of uninsured and control health care costs could have a broad economic impact that benefits even businesses that don't buy the Dirigo insurance plan. "This is not about putting out another insurance product," says White. "If we can get a hold of health care costs we'll have a genuine economic stimulus package, one that addresses job creation, tax relief and higher wages in one fell swoop."
That argument, of course, sends the debate back into the universe of big picture impacts and long-term goals of the Dirigo Health Reform Act. Business owners and other observers waiting for something concrete from Dirigo will have to look to the benefits plan and price coming later this spring. But even then, Dunne promises that Dirigo will continue to tweak the plan based on market conditions, customer feedback and how well the plan is meeting its broader goals ˆ which to some business owners signals that the Dirigo debate is far from over. "This is the pause in the action," says Lawson-Stopps. "I think Dirigo is going to be an evolutionary process, so there's nothing to do now but wait and give the folks time to develop it, then see how it changes from there.
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