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Premiums Skyrocketing Where Health Insurers Have Their Way With State Legislators, As in Maine

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Augusta, Maine -- Almost 3,200 miles separate Sacramento and Augusta, but the gulf between those two state capitals actually seems much greater when measuring the comparative trust that political leaders there have placed in health insurance companies.

This week and next, I will provide a glimpse into the contrasting approaches California and Maine are taking to their health care systems, especially as those approaches relate to health insurance.

We'll start by looking at what the Republican-controlled state government in Maine has done to dramatically affect the cost of health coverage for the state's 1.3 million residents. Next week, I'll share the perspective of California Insurance Commissioner Dave Jones, a Democrat who made it clear during his campaign last year that he will be tough on insurers as he seeks to protect the interests of the state's 37 million residents.

Golden State voters last year elected a Democrat, Jerry Brown, to succeed Republican Arnold Schwarzenegger as governor, and kept Democrats in control of both chambers of the legislature. Maine voters did exactly the opposite; Democrats lost control of both the House and Senate, and Republican Paul LePage was elected governor by slightly more than 10,000 votes in a field of five candidates.

It would be hard to find a state where the investment in campaign contributions by the insurance industry has paid better dividends than in Maine. Anthem Blue Cross Blue Shield, for instance, gave $7,500 last year to the Republican Party or party committees, and contributed an undisclosed amount to LePage's transition efforts. By the time the governor and legislators were sworn in earlier this year, the insurance industry must have had its wish list ready and its lobbyists poised to begin drafting industry-friendly legislation for lawmakers to introduce.

The insurers hit the jackpot in the spring when the industry's legislative allies rushed a bill through -- which LePage quickly signed -- that will indeed reform the state's health insurance marketplace -- exactly the way insurers want. In many ways, it is taking the state in the opposite direction of the consumer protections enacted as part of the health reform legislation that Congress passed last year. The state law took effect last month. In anticipation of the law becoming effective, insurers prepared new rate quotes that enabled them to increase premiums -- in many cases dramatically -- for policies that renewed Oct. 1.

The industry's lobbyists must have been pinching themselves that they were able to get everything they wanted to ensure their employers will reap handsome profits over the next few years. In addition, the state's insurers are in firm control of a committee the governor appointed to advise lawmakers on how to set up the state exchange, or insurance marketplace, required by the federal law.

It's hard to imagine what else they could have asked for that they didn't get.

To give you an idea of just how quickly the industry's bill made it to LePage's desk compared to other important pieces of legislation, consider this: lawmakers passed the measure just a week and a half after the first public hearing on the bill. By contrast, the legislature devoted 48 days to the contentious debate over whether to call the whoopie pie the state's official dessert or the state's official treat. Seriously.

The fast-tracking of the insurance industry's bill was ordered by legislative leaders so that consumer advocates would have virtually no time to amend or kill the bill, which with the stroke of LePages's pen abolished consumer protections enacted over two decades of previous gubernatorial administrations.

Among other things, the legislation did away with hard-fought protections for rural families that had required insurers to have at least one doctor in their provider networks within 30 miles of where those families lived and at least one hospital within 60 miles. As a result, many families in the far northern reaches of the state will have to drive several hours to get to a doctor or hospital in their insurers' networks.

The new law also allows insurers to charge older Maine residents far more than is allowable today. Given the fact that Maine has the country's oldest population, that means skyrocketing premiums for a large percentage of the state's residents.

Before the law was enacted, insurers could not charge older residents more than one and a half times as much as younger residents. Now they can charge them three times as much, which is the limit established in the federal reform law. The new Maine law will let insurers charge older residents five times as much if they can get around the federal law.

As a result, some small businesses with the older workers are already seeing their policies soar by 90 percent or more.

The new law also allows for the sale of out-of-state insurance policies from four of the five other New England states (Connecticut, Massachusetts, New Hampshire, and Rhode Island), which means that the Maine Bureau of Insurance will have no jurisdiction over those policies. Maine residents who buy those out-of-state policies will get no protection from Maine's insurance regulators.

Finally, insurers in the state will no longer have to file for a rate review by state regulators unless their rate increases are 10 percent or more.

With all of these changes, there is no doubt insurers that do business in the state will be able to achieve profit margins never before even imagined. Regular Mainers, on the other hand, are not going to fare nearly as well.