Maine’s new market-based health care reform is bringing insurance premiums down by as much as 60 percent in the individual market.
Elected in 2010, Governor Paul LePage (R) made health reform a top priority and signed Maine’s new reform into law in May 2011. Shortly thereafter, he stated, “I believe that common sense, personal experience, and our nation’s collective experience show that the private sector is superior to the government sector. It is time that we reverse course, create a more competitive marketplace, and make a healthier health care market.” After just one year of implementation, building reform around those principles has proved successful.
But Maine’s reform success comes after years of ever-increasing premiums and damaging reforms. In 1993, the state legislature enacted a law with components that were similar to provisions currently in Obamacare, such as community rating and guaranteed issue. These regulations caused the number of people insured in Maine’s individual market to drop by 44 percent from 1993 to 2009.
Writing for Heritage, Tarren Bragdon and Joel Allumbaugh explain:
The cause is clear. When guaranteed issue and narrow community rating took effect, premiums and deductibles skyrocketed. Essentially, insurance became priced for—and therefore only attractive to—the oldest and sickest enrollees. The young and healthy dropped coverage, leaving fewer and sicker enrollees.
In October 2011, Maine began implementing free market-based reforms that doubled the variation in premium costs allowed for different age groups. This encourages younger and healthier individuals to enter the market, which lowers costs. The Wall Street Journal illuminates the savings on an individual basis:
According to the Maine Bureau of Insurance, a married couple age 40 to 44 with one child will pay $1,919 a month for a policy with a $2,250 deductible in 2013 if they choose to re-up their current policy. If the same family switches to the new health plan, or buys the plan for the first time, their premium will fall to $920, a 52% decrease. A couple over 60 could buy the same policy for $1,290, down from $2,466 under the old system. Or a young adult 25 to 29 could buy a high $10,000 deductible plan for catastrophic expenses for $232, previously $665.
In addition, Allumbaugh expects new insurers to enter the more friendly market, increasing competition and driving costs down even further in the future.
Maine’s story serves as a twofold lesson, as Bragdon and Allumbaugh write:
Maine’s experience with the costly failures of a big-government, command-and-control approach to health care reform is a salutary warning of the likely adverse effects of similar provisions in Obamacare. In contrast, Maine’s new approach to health care reform shows other states and Congress how to chart a better course toward more innovative and effective health care reform using proven patient-centered, market-based designs.
Will Obamacare make America learn the hard way, or can we learn from Maine’s mistakes and repeal Obamacare?