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The Role of Regulation Regarding Maine Health Insurance

The Role of Regulation

Maine, like all states, regulates health insurance sold within its borders. This regulation does not extend to self-insured companies that are regulated by the Department of Labor and the federal Employee Retirement Income Security Act or ERISA. In Maine, the Bureau of Insurance, within the Department of Professional and Financial Regulation, regulates health insurance companies selling policies within the state. The chief regulatory authority is the Superintendent of Insurance.

There are two major components of Maine's regulatory activity. The first is to assure that a company will be able to pay claims to individuals for whom premiums have been collected, either directly or through an employer. Insurance is a form of promise. A premium is paid today in exchange for the promise that medical expenses, if incurred, will be paid at some future date. The regulators' job is to assure that the insurance company will be in business to fulfill this promise.

Secondly, the Bureau of Insurance is required to implement various legislative requirements. Many states, including Maine, have identified certain benefits and services that are required to be included in any medical insurance plan that is operating in the state. Examples of "mandated benefits" include a minimum number of chiropractic exams, certain annual preventive services and the like. In Maine, there are over 40 such mandated benefits. If a company is self-insured, it is not required to provide mandated benefits because federal ERISA laws preempt the state.

Another example of the Bureau's regulatory authority is around rules governing how insurance companies can provide coverage to individuals and small groups. For example, Maine has a "guarantee issuance" law which requires an insurance company, if it provides individual coverage, to enroll anyone who applies, regardless of prior medical condition. Similarly, there are regulations around the price that can be charged to an individual. Someone who is at higher risk to be sick cannot be charged an excessively higher premium than someone who is at lower risk. These provisions represent attempts to assure available and affordable health insurance for individuals. According to the insurance industry, however, these provisions make it very difficult to insure individuals profitably and, consequently, only a few companies offer individual coverage in Maine.

A final example is the Bureau's authority around provider contracting by an insurance company. Rule 850 requires an insurance company to reimburse for services provided by a hospital or doctor in a patient's geographic location, regardless of whether the insurance company has established a mutually acceptable contract with the provider. The purpose of this rule was to assure consumers that they would not be required to travel unreasonable distances for health care, simply because an insurance company could, or would, not contract with a local provider. Self insured companies are not subject to Rule 850. Some self insured companies are increasingly exercising their exemption to negotiate preferred contracts with a select network of hospitals and physicians that are determined, by the company, to provide greater value, as measured by quality indicators and/or cost effectiveness.