Repeal excessive Dirigo tax on insurance

Mainers are facing an economic storm in the cost of heating oil this winter, and Gov. Baldacci has promised to make alleviating it the first priority of business when the Legislature returns in early January.



We legislators should confront another fiscal blizzard slated to strike Maine residents on Jan. 1.



It's the "Dirigo tax," a sneak attack on Mainers is now expected to cost a typical family an additional $300 to $400 a year for health insurance.



Mind you, this is on top of premium increases already forecast in the 15 percent range.



Health insurance has become a backbreaking expense for companies and individual consumers alike. Due to ruinous mandates imposed by state government in the early 1990s, Maine now has the second most expensive health insurance in the country.



Now we are being forced to pay even more, to subsidize the governor's "signature issue" - Dirigo Health. The Dirigo tax, incidentally, will also be used to pay for more than 4,000 people recently added to MaineCare, or Medicaid, who do not qualify for federal matching funds.



These people are totally outside the scope of Dirigo, so there is no reason to fund them with Dirigo money, but the administration plans to do so anyway.



Meanwhile, some 1,200 Dirigo Choice enrollees have already dropped out, prompting Dirigo's managers to award a grant to the Muskie School to discover why people are leaving the taxpayer-subsidized insurance program.



Known officially as the savings offset payment, the Dirigo tax supposedly represents savings to Maine's health system. In theory, insurers would enjoy lower costs because Dirigo, by covering previously uninsured people, would reduce the amount of charity work performed by hospitals, physicians and other providers. (Those costs are currently "shifted" to people paying for private coverage.)



The insurers, in turn, are supposed to reimburse Dirigo for those savings to further fund the program. Initially, the Dirigo Health Agency claimed the savings were $233 million over the past year. The DHA board reduced that to $136 million. And state Superintendent of Insurance Alessandro Iuppa recently ruled that savings actually amounted to only $43.7 million.



Now, in a negotiating atmosphere turned sharp and bitter, health insurance companies are arguing strenuously there have been no savings at all - certainly none that can be attributed to Dirigo.



Who's right? Who knows? But if the estimates can range from $233 million down to $43.7 million, any estimate of savings is dubious. Regardless, the superintendent's decision will stand - insurers will be forced to pay as much as $43.7 million.



But insurance industry officials, claiming they cannot "absorb" the fee, say they will pass it on to customers as higher premiums. Correctly sensing that the "pass through" will inflame voters and erode support for his cornerstone program, the governor called a press conference on Nov. 3 where he heatedly denounced the Dirigo tax.



"The country is watching," the governor declared. "This is unacceptable. Period."



The governor, however, has little control over the insurance companies. And as they see it, business is business. The tax, said a Cigna spokeswoman, "is going to pave the way for increased health insurance costs in the state, which will result in some Maine people losing their health insurance."



In light of these disturbing developments, it is time to repeal the Dirigo tax and perhaps find another way to fund the program. If the tax is unacceptable to the governor, it's clearly going to be unacceptable to Mainers, who will rightfully ask how the governor expects to lower the cost of health insurance by imposing a new tax on it.



The $300 or $400 Dirigo tax on a family would pay for a tank of heating oil. It would pay for winter coats and boots for their kids. There is no justification for forcing citizens to pay that much money for a program that is of zero value to them.



Politically, of course, the tax is a loser. Most folks haven't paid attention to the workings of Dirigo. But they will be furious when they learn that this scheme is going to cost them big time, especially when the incessant Dirigo commercials on radio and TV keep telling them that the program is such a raving success.



Nor will many legislators enjoy facing angry constituents demanding to know how this fiasco could have happened. How could they defend such a thing?



I believe most legislators would vote to terminate this tax, for fear that voters would retaliate next November. We may find out when 2006 rolls around.