On Monday, September 17, 2007, the acting superintendent of insurance issued a decision and order, approving in part the determination of savings by the Dirigo Health Agency Board of Directors. The acting superintendent approved savings totaling $32.8 million – less than one-half of the $78.1 million in savings originally found by the Dirigo Health Board of Directors in a decision dated August 3, 2007. The determination of savings serves as the cap for next year's savings offset payment (SOP), to be assessed on plan years beginning between July 1, 2008 and June 30, 2009.

The process for determining next year's savings offset payment began in July, when the Dirigo Health Agency's consultants, schramm-raleigh Health Strategy (srHS), issued a report indicating that there was $92.7 million in savings as a result of the Dirigo Health program's third year of operations (2007).

The Maine State Chamber of Commerce was an intervenor in this year's proceedings, just as in years one and two, and the Chamber's attorneys (William Stiles and Brett Witham of Verrill Dana) and expert witness (Roland Mercier of Baker Newman Noyes) played a pivotal role in once again reducing this year's savings determination by more than half. In fact, on the eve of the hearing, the Dirigo Health Agency reduced its savings determination from $92.7 million to $88.4 million, in response to issues identified by the Maine State Chamber's expert. After holding a hearing on July 23 and 24, 2007, the Dirigo Health Board of Directors found savings of $78.1 million had resulted from Dirigo Health's third year of operations. That decision was then forwarded to the Acting Superintendent of Insurance for review.

The Acting Superintendent conducted a hearing on Monday, September 10, 2007 and issued his decision, on Wednesday, September 19, 2007finding only $32.8 million of the $78.1 million claimed by the Dirigo Health Board of Directors was reasonably supported by the evidence in the record. In issuing his decision, Acting Superintendent Cioppa raised serious concerns with respect to the continued viability of the savings methodology used by the Dirigo Health Agency and its consultants. The full text of the decision is available at http://www.maine.gov/.

Following the decision of the Acting Superintendent, on September 19, 2007, the Dirigo Health Board of Directors voted to assess the full $32.8 million as the savings offset payment applicable from July 1, 2008, to June 30, 2009. This translates to an SOP of 1.74 percent, which will apply to plan years beginning between July 1, 2008, and June 30, 2009.

The savings offset payment continues to be a declining source of revenue for the Dirigo Health program, with the "savings" from the Dirigo Health program having decreased from $43.7 million in year one to $34.3 million in year two, and now to $32.8 million in year three. The consequences for the Dirigo Health program are increasingly apparent, with the program now closed to subsidized enrollment and projected to run out of money for subsidies in February 2009. Assuming the same attrition rates as currently experienced by the program, the enrollment at that time is anticipated to be approximately 9,300, down from the program's current enrollment of 15,113.

At this point in time, it is unclear how that shortfall will be addressed. One thing remains clear, however – the funding of the program must be changed if the program is to survive. The savings offset payment is fundamentally flawed: It places the burden of financing the program on the backs of employers and individuals who are struggling with the cost of health insurance today and is a declining source of revenue for the Dirigo Health program. In addition to changing the funding source, it is also essential to look at the current structure of the program—both the subsidy and benefit structure—to determine if the program is sustainable as it exists today. With 54 percent of the monthly premium per member per month being subsidized (see chart at right), the program has proven to be very costly.

For additional information on Dirigo Health and the savings offset payment, please contact Kristine Ossenfort by calling (207) 623-4568, ext. 21, or by emailing kossenfort@mainechamber.org.