Maine’s small businesses will see a reduction in health insurance premiums next year for the first time since at least 2001 under a law proposed by Gov. Janet Mills and passed by the Legislature.
Republicans, however, have criticized the change, saying it will result in a slight and temporary decline in premiums for small businesses in 2023 while increasing costs in the individual market over the next few years.
A review of rates filed with the Maine Bureau of Insurance for Affordable Care Act coverage and off-market plans shows premiums for the small-group market, which includes businesses with 50 or fewer employees, will decline by an average of 0.8 percent. Other states in the Northeast are experiencing increases in the small-group market, including 11.5 percent in Rhode Island, 14.8 percent in Connecticut, 7.9 percent in New York and from 11.7 percent to 18.3 percent in Vermont.
According to the Mills administration, small-group rates in Maine would have increased by 12 percent if the law hadn’t passed and received approval from the Biden administration. About 52,000 people in Maine get insurance through their employers in the small-group market.
Rooms in the emergency department at Mercy Hospital’s Fore River campus. Gregory Rec/Staff Photographer
Mills credited the premium decrease to a proposal she made to combine the small-group and individual markets. Insurance plans will still be separate for individuals and small businesses, but the risk pools for both markets are combined into one.
“Thanks to the law I proposed and signed, we are reversing the trend of steadily increasing health insurance costs for many small businesses for the first time since at least 2001,” Mills said in a statement on Wednesday. “This is a victory for many Maine small businesses and their hardworking employees who rely on the small-group market for health insurance, and it couldn’t come at a better time. As Maine small businesses grapple with high costs from inflation, this is one less thing they will have to worry about.”
But Rep. Josh Morris, R-Turner, the lead Republican on the Legislature’s insurance committee, told the Press Herald that thanks to a “party-line” law that Democrats rammed through, “small-business rates (will) temporarily go down, will increase again, according to the administration’s own projections, and individual rates will increase over what they would have been.”
The individual-market premiums in Maine will increase by 11.4 percent in 2023, down from the Mills administration’s initial estimates of 14.7 percent. Consumers are largely protected from premium increases in the individual market due to generous subsidies by the federal government to support the ACA. About 65,000 Mainers have individual insurance through the ACA.
“Gov. Mills is touting a one-time, election-year minuscule savings for some customers, but she is ignoring the 11 percent increase in rates for customers in the individual market caused by her policies,” Morris said. “And the one-time minuscule price drop will turn into rate hikes again in the near future, according to the Mills administration’s own data.”
Morris was referencing a January 2022 report by Gorman Actuarial Inc. prepared for the Maine Bureau of Insurance that predicted individual-market premiums would increase 6 percent to 8 percent more annually through 2025 compared with what they would have been had the individual and small-group markets remained separate. On the small-group side, projections by Gorman showed a modest decrease in 2023 of 0.9 percent, nearly matching the actual result.
The modeling also projected small-group increases in 2024 and 2025 of 7.5 percent and 4.5 percent. The projected hikes were 4 percent to 6 percent lower per year than they would have been if the markets had not been merged.
Jackie Farwell, spokeswoman for the Maine Department of Health and Human Services, said the Gorman report “does not take into account an additional $8 million that Maine subsequently received for reinsurance through the American Rescue Plan, which will further improve rates for consumers and small businesses in 2023.”
But Mitchell Stein, a Cumberland-based independent health policy analyst, said the reforms were a “one-shot deal.”
“It’s great we saved some money (in the small-group market) for one year, but it does not impact the cost drivers that will continue to be an issue in the health care system,” Stein said. “This is not a long-term fix to anything.”
Catherine Wygant Fossett, executive director of the Maine-based Institute for Family-Owned Business, a nonprofit that represents many small companies, said that “anything that reduces costs for businesses is important.”
Fossett said the big question for her is whether the reduction is sustainable. Will it be a one-year reprieve on health care costs, or more long-range?
“What about the next five to 10 years?” she asked.
Fossett said many small businesses struggle to afford quality health care for their employees, and have weathered many years of increasing costs. The small-group market has been experiencing declining membership and rising premiums – average rate increases were 31 percent from 2019 to 2022, according to the state insurance bureau.
Individual plans are sold through the ACA marketplace, while small-group plans are sold off-market. Individual plans will be available for purchase starting Nov. 1 at coverME.gov.
MORE FEDERAL MONEY EXPECTED
The Made for Maine Health Coverage Act of 2020 combined the small group and individual markets and extended a reform originally enacted under former Gov. Paul LePage – the Maine Guaranteed Access Reinsurance Association – to the small-group market. Mills is running for re-election against LePage this year.
Reinsurance protects insurers from expensive claims by having a third party pay higher dollar-amount claims. In Maine’s case, funding for reinsurance, which helps stabilize the market, is derived from federal money and fees paid by insurance companies.
The reforms had to be approved by the federal government, which did so in July. Maine will receive additional federal funding for MGARA in 2023. Farwell said the amount has yet to be determined.
According to the Mills administration, small-group rates would have increased by 12 percent without the reforms becoming law and receiving approval by the Biden administration.
“The adjusted premium rates are very encouraging, and show the positive impact of the merged market, particularly for the small-group market, which has seen a trend of large increases over the past several years,” said Timothy Schott, acting superintendent for the Maine Bureau of Insurance.
State Sen. Heather Sanborn, D-Portland, said that by “merging the individual and small-group health insurance markets, we sought to reduce premiums for people insured through their small-business employer, make it easier for small businesses to offer insurance and stabilize the market.”
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