Leading the Way? Maine's Initial Experience in Expanding Coverage Through Dirigo Health Reforms

In 2003, Maine adopted the Dirigo Health Reform Act, which aimed to make affordable health care coverage available to every Maine citizen by 2009, slow the growth of health care costs, and improve the quality of care. "Dirigo," the state's motto, meaning "I lead" in Latin, is a fitting name for the program. At the time the legislation passed, Maine was the first state since the early 1990s to enact comprehensive health care reform legislation and to set a goal of providing affordable health insurance coverage to everyone in the state.

Since then, several other states, notably Massachusetts and Vermont, enacted ambitious health reform and universal health coverage legislation, and Illinois adopted legislation to cover all children. In 2007, more than a dozen states considered proposals that strive for universal health coverage. Lessons from Maine's experience implementing the Dirigo Health program could be useful to these and other states in their efforts to expand insurance coverage.

Is Maine leading the way toward universal coverage? This study examined interim indicators of Maine's progress in providing affordable health insurance coverage after two years of program implementation, midway between the legislation's adoption and its 2009 goal. (The study's research methods and data sources are described at the end of this report.)

The evaluation focused on the state’s progress in implementing Dirigo Health's two major coverage initiatives: 1) DirigoChoice, a subsidized health insurance program, initiated in January 2005, for eligible small businesses, self-employed workers, and individuals; and 2) an increase in the annual income eligibility level (from 150% to 200% of the federal poverty level, or FPL) in the state’s Medicaid program (called MaineCare) for parents of dependent children under age 19.

These two initiatives built on a series of previous Medicaid eligibility expansions, including a program started in 2002 to cover childless adults earning up to 100 percent FPL. The Dirigo Health Reform Act authorized expanded eligibility for this group to 125 percent FPL, but it was not implemented due to budget constraints related to the terms of a federal Medicaid waiver. However, this study examined enrollment trends among childless adults since that program operated concurrently with Dirigo expansions and offered another avenue for coverage gains among low-income individuals.

Key Findings

• Enrollment in Dirigo Coverage Programs. In September 2006, after 20 months of operation, almost 11,100 individuals were enrolled in DirigoChoice, about one-third of whom did not have coverage before enrolling. Another 5,000 parents with income between 150 percent and 200 percent FPL had enrolled in the Medicaid parent expansion. The number of previously uninsured individuals enrolled in the two Dirigo programs—an estimated 9,000 to 11,000—is modest relative to the estimated 136,000 residents uninsured in 2002.
• Small Firm Response to DirigoChoice. As of September 2006, about 700 small firms had enrolled in DirigoChoice. The average firm size is seven employees. Half of the firms had not previously offered health benefits to employees. Despite this progress, enrolled firms compose about 2.5 percent of all businesses in the state eligible to enroll. Survey results indicate that very small firms, those with two or three employees, find the product unaffordable.
• Subsidies Targeted to the Working Poor. Nearly 80 percent of DirigoChoice members have family income below 300 percent FPL, qualifying them for premium and deductible subsidies. Almost half (46%) of all DirigoChoice members earn less than 150 percent FPL and therefore qualify for the greatest discounts. In September 2006, twice as many individuals were covered by the two Medicaid eligibility expansions for parents and childless adults (about 23,100) than were enrolled in DirigoChoice (11,100), suggesting that low-income individuals found a fully subsidized public plan preferable to a partially subsidized private plan.
• Financing Source for Coverage Expansion is Difficult to Sustain. Maine planned to finance most of the cost of DirigoChoice subsidies through an innovative approach, called the "savings offset payment" (SOP). It sought to capture savings to health care providers from lower uncompensated care costs and other cost-saving initiatives through assessments on health insurance claims. However, the aggregate measurable cost savings attributable to Dirigo initiatives has produced lower revenues for subsidies than needed to finance much greater program enrollment. In addition, the process of measuring Dirigo's impact on costs has become so adversarial that nearly all stakeholders regard finding alternative funding sources for DirigoChoice subsidies necessary for sustaining the program.