Financing Maine's Dirigo Health Plan 'Savings Offset Payment'


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Presentation by Lynn Blewett at the Minnesota Senate, Health and Human Services Budget Division, February 27 2008.

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Financing Maine's Dirigo Health Plan 'Savings Offset Payment'

  1. 1. Financing Maine’s Dirigo Health Plan “ Savings Offset Payment” Minnesota Senate Health and Human Services Budget Division February 27, 2008 Lynn A. Blewett, Ph.D. Associate Professor University of Minnesota, School of Public Health Supported by a grant from The Robert Wood Johnson Foundation
  2. 2. Maine Dirigo Health <ul><li>First Comprehensive Reform – 2003 with goal of universal coverage by 2009 </li></ul><ul><li>DirigoChoice </li></ul><ul><li> - Private Health insurance product </li></ul><ul><ul><li>Small employers access to subsidized health insurance through one large private insurer – Anthem </li></ul></ul><ul><ul><li>Sliding scale subsidies for enrollees </li></ul></ul><ul><ul><li>< 300% FPL </li></ul></ul><ul><ul><li>- Affordable premiums for those > 300% </li></ul></ul>
  3. 3. Source: AcademyHealth State Coverage Initiatives, Sept 2006
  4. 4. Maine Dirigo Health <ul><li>Financing </li></ul><ul><ul><li>“ Savings offset payment” – recovery of reductions in charity care and voluntary savings targets from insurance carriers and TPAs </li></ul></ul><ul><ul><li>1.85-2.41% of paid claims from insurers and TPAs </li></ul></ul><ul><ul><li>Employer and individual contributions </li></ul></ul><ul><ul><li>General Fund Contributions </li></ul></ul><ul><ul><li>Federal match for Medicaid/SCHIP premium subsidies for eligible who buy-in to DirigoHealth Choice </li></ul></ul>
  5. 5. Financing: Savings Offset Payment <ul><li>- Estimated savings from reform initiatives to reduce the rate of growth in the health care system </li></ul><ul><li>- Savings used to finance Dirigo Health Plan </li></ul><ul><li>Estimated savings from reductions in current spending </li></ul><ul><ul><li>-Reductions in bad debt/charity care due to fewer Uninsured (more covered/paying patients) </li></ul></ul><ul><ul><li>- Voluntary growth gaps apx 4.0% </li></ul></ul><ul><ul><li>- Lower rate of hospital growth via voluntary cost controls </li></ul></ul><ul><ul><li>- Limits on CON and Capital Investment Fund Savings </li></ul></ul><ul><ul><li>- Less cost shifting to other payers via increased Medicaid rates for providers </li></ul></ul><ul><ul><li>- Increased physician and provider fees </li></ul></ul>
  6. 6. Savings Off-Set Payment -Theory Maine Health Service Costs Dirigo Reforms Reduction In Health Service Costs Premiums Savings Offset Payment Funding for DirigoChoice
  7. 7. Devil is in the Details <ul><li>“Aggregate Measurable Cost Savings” </li></ul><ul><li>How to calculate; what data to use </li></ul><ul><li>Hired Mercer to do calculations </li></ul><ul><li>Board of Maine DirigoHealth approves each component </li></ul><ul><li>Mercer estimated total savings of $136.8 million </li></ul><ul><ul><li>Board approved $43.7 that will be the target for the Offset Payment </li></ul></ul>
  8. 8. The Offset Payment is not a Tax <ul><li>“Savings offset payments are mechanisms created to fund the administration of Dirigo subsidy program. The Act specifically states that savings offset payments may not fund general administration costs. As such, the SOPs are appropriately characterized as costs of administering a program under the police power of government, not a tax.” </li></ul>Source: Summary of Justice Cole’s Decision, August 7, 2006
  9. 9. Savings Offset Payment (SOP) <ul><li>$43.7 million (yr1); $34.3 million (yr2) </li></ul><ul><li>SOPs apply to claims paid for plan years beginning on or after January 1, 2006. The SOP is a percentage of claims paid during the relevant year. </li></ul><ul><li>The 2006 SOP was: </li></ul><ul><ul><li>For health insurance carriers, 2.408 % of annual paid claims for health care policies </li></ul></ul><ul><ul><li>For 3rd party administrators, 2.408 % of annual paid claims for health care for residents of this State </li></ul></ul><ul><ul><li>For employee benefit excess insurance carriers, 2.408 % of annual paid claims on employee benefit excess insurance carriers </li></ul></ul>
  10. 10. SOP Court Challenge <ul><li>Maine Association of Health Plans et al. v. Superintendent of Insurance et al. </li></ul><ul><li>Unsuccessful challenge to the method of calculating SOPs </li></ul><ul><li>2006: Cumberland County Superior Court </li></ul><ul><li>2007: Maine Supreme Court (5-1 ruling) </li></ul><ul><li>Both upheld methodology of calculating SOPs </li></ul><ul><li>Found statute creating Dirigo Health constitutional </li></ul>
  11. 11. Summary <ul><li>Maine has unique approach to financing health care coverage for working uninsured </li></ul><ul><li>Challenged every step of the way but currently upheld by courts </li></ul><ul><li>Maine is currently looking for additional sources of financing including provider assessments similar to Minnesota </li></ul>
  12. 12. SHADAC contact information 2221 University Avenue, Suite 345 Minneapolis Minnesota 55414 (612) 624-4802 Principal Investigator: Lynn Blewett, Ph.D. ( Research Director: Michael Davern, Ph.D. ( Investigator: Kathleen Call, Ph.D. ( Center Director: Kelli Johnson, M.B.A. ( SRE Deputy Director: Elizabeth Lukanen, MPH (