Proposed Interstate Compact Would Lower Costs, Uninsurance Rates in Maine

Published December 1, 2007

On September 7, The Maine Heritage Policy Center released a model bill it says would lower health insurance and health care costs statewide by making a greater range of insurance products available to the state’s residents.

Supporters of the measure say uninsurance rates in Maine would drop as a result–a feat the current health care law, a government-run system known as Dirigo 2.0, has failed to achieve.

Multiple Choice

A package of health insurance market reforms is included in the model legislation, allowing state residents to purchase any licensed insurance product available in any New England state.

“Maine is a small state of 1.3 million,” explained Tarren Bragdon, the group’s director of health reform initiatives. “By creating a New England compact, insurance plans available to the 13 million people living in the other five New England states [would] be available in Maine.”

The bill also would make the individual and small-group markets more competitive by increasing the number of providers. It would cut taxes on health insurance and health care services and would allow individuals purchasing health insurance on their own to deduct the premiums from their state income tax.

Lower Costs

Currently, choices in Maine are limited, and that drives up costs.

“If a Maine parent does not have access to affordable employer-sponsored coverage for her 10-year-old child, she essentially has one choice in Maine’s individual market for a product with a monthly premium of $700 ($1,000 deductible) to $218 ($5,000 deductible),” Bragdon explained. “However, in New Hampshire, she has numerous more affordable options from $59 ($5,000 deductible) to $140 ($1,000 deductible) [per month in premiums].”

The same situation applies to healthy young adults, who often find health insurance to be so prohibitively expensive they choose to go without it.

“By lowering costs and expanding access, we estimate [this model bill] would significantly reduce the 122,000 Maine people who are uninsured,” Bragdon concluded.

‘Great Idea’

The model legislation, Bragdon said, eliminates more than $50 million in state taxes on health insurance premiums and allows all Maine taxpayers to deduct health insurance premiums from their state income taxes, saving up to 8.5 percent. By changing the individual insurance market, the bill also would lower the non-employer-based insurance cost for 40,000 Maine residents by an additional 30 percent.

Devon M. Herrick, Ph.D., a senior fellow at the Dallas-based National Center for Policy Analysis, said letting Maine residents buy health insurance licensed in neighboring states is “a great idea.”

“Currently, the United States has no national market for health insurance. Rather, there are 50 separate state markets–leaving residents of small states like Maine without an adequate risk pool,” Herrick explained.

“The federal government could facilitate a national market by creating federally chartered insurance that would compete with state-regulated insurance,” Herrick continued. “That way, rather than being limited to buying insurance that is licensed in each state, state residents could choose from insurance plans available across the country. This would also boost competition among health insurers.”

Dr. Sanjit Bagchi ([email protected]) writes from India.

For more information …

“An Act to Expand Affordable Health Insurance Choices in Maine,” a model bill released by The Maine Heritage Policy Center in September 2007, is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to and search for document #22201.