Third grader Mason wants to be an astronaut when he grows up. He’s really   motivated and by 10:00 a.m. he’s finished all three of his math worksheets and Mrs. Sucy resorts to giving him busy work while she finishes coaching his fellow classmates through their work. Third grader Sophia, however, is still stuck on math problem number one. She’s too embarrassed to ask Mrs. Sucy to slow down and repeat the lesson again.

 Mrs. Sucy is a terrific teacher and she recognizes her students each learn in different ways – some by doing, some audibly, some visually. However, there’s just not enough time in a day to fully meet each of her students varying needs. Mrs. Sucy’s 25 students are akin to train cars all on the same track, all forced to go the same speed, run by one engine.  If she as the engine slows the train down, Mason will be altogether bored and break away. If she speeds up to accommodate Mason, she’ll certainly lose students, and most definitely blast Sophia beyond her speed!

Technology is the key to revolutionizing education for all kids around the world.  The term “online learning” embraces this very concept.

(Download the full report here)

What is online learning?

Online learning, often referred to as “anywhere, any time learning,” is an education model whereby a student completes his coursework through internet-based programs. Of course this model can take many different shapes. It is possible for a student to enroll in a full-time online learning program which is comprehensive of the entire subject matter for his grade level. Or, a student may take just one or a handful of courses online while he is enrolled in a traditional brick and mortar school.

Most popular models of online learning

Full Time:

Students enrolled in full time online learning perhaps have the most flexibility in their education. Rather than a traditional brick and mortar school setting, students “log on” to school with the click of a button on their computer from anywhere with internet …  a home desktop, an airplane, a hospital bed, a hotel room, the list is endless.

Examples: K12, Inc. and Connections Academy – Both are widely popular across the U.S. and each were to be online learning providers for the two proposed virtual charter schools in Maine. Last year, the two proposed virtual charter schools were recommended by the Maine Charter School Commission to resubmit their applications in the next reviewing cycle and they did so in January of 2013. The Commission denied both applications and has not yet approved a virtual charter school in Maine.

Although Maine’s charter school law does allow provisions for a full time virtual charter school, use of this full time virtual school model currently exists in Maine only in a home school situation where parents pay for it out of pocket (in addition to their taxes which in part fund the local public school system).

Blended:

Students’ time is divided between online learning and teacher-led, hands on workshops where there is engaging discussion and activities which complement the individual learning taking place through the online programs. Traditional desks are replaced by mini cubicles containing personal computers. Students are with their fellow classmates in a brick and mortar school and are supervised by teachers. Students take the same online courses but may progress at each of their individual paces.

So for example, Mason and Sophia are taking the same third grade math curriculum. Mason is completing his long division unit after watching the virtual lesson on his computer earlier this morning; he looks forward to moving on to fractions next week! Sophia is feeling confident in her division skills as she was able to hit “pause” during the virtual lesson, while she takes some extra notes. She proceeds to start her exercises and realizes she forgets her first step. She goes back to the virtual lesson and clicks “repeat.” Meanwhile, Mrs. Sucy who has the ability to mill around the room and monitor the progress of her students as individuals, has her own computer and receives a red flag notification on her monitor indicating Sophia may need some encouragement or a bit of an explanation.

Examples: Carpe Diem Collegiate High School and Middle School in Yuma, Arizona

Carpe Diem’s expenditures per student are $4,000 less than the national average. ^[1]

This model, in its purest form, does not yet exist in Maine. However, with state surplus funds, the Maine Learning Technology Initiative, launched in 2001 by the Maine Department of Education and Apple, Inc., issued laptops to all middle school students and teachers. Through negotiations with Apple, Inc. in 2009, the MLTI expanded and supplied new laptops to all of Maine’s public high school students.^[2] Given this laptop program and the widespread support of superintendents throughout the state, Maine has a nearly perfect foundation to implement the blended model of online learning.

Supplemental:

A student may enroll in an online class or two, in addition to his traditional education, for various reasons. Some students, especially those who live in rural areas, would not otherwise have opportunities to learn Mandarin Chinese or take an Advanced Placement course in preparation for college. Others need to catch up on a particular subject over the course of the summer; perhaps they were sick for an extended period of time or just simply succeeded in all but one subject.  Those who don’t like to get their hands dirty, can even virtually dissect a frog in an online biology class!

Examples: PLATO Learning, Inc. and Virtual Learning Academy (with either of these providers, students may enroll in one or two courses or full time)

This model does exist in Maine. Founded in January 2012, the Maine Virtual Learning Consortium which was established by the Maine International Center for Digital Learning and RSU 19, offers eight courses including Latin, Anatomy and Physiology, and Art History. Schools which choose to participate are called “Partner Schools;” they pay an annual enrollment fee and must contribute two one-semester online courses to be distributed for use throughout the other Consortium Partner Schools.  ^[3]

Who provides online learning?

Just in the past year, the number of Maine state-approved online learning providers has increased from three to seven. These private providers, approved for use in the public school classrooms, are:  Advanced Academics, Apex Learning, Connections Academy, K12, Inc., Lincoln National Academy, PLATO Learning, Inc., and Virtual Learning Academy.

Elluminate Live! Session

Teachers

Online learning teachers interact with their students through e-mail, electronic real time white boards, instant messaging, blogs, forums, phone, chat rooms, and more! The screenshots below give you an idea of the face to face class time and accountability that can take place even through cyberspace. Students interact and respond to questions through use of the chat box, private messaging, and through a microphone when called upon by their teacher. Teachers can use the whiteboard to type instructions, draw shapes and even graph mathematical equations. Class may meet once a week or multiple times per week. Extra tutoring can take place between the teacher and students as needed on their own time. Homework can be submitted via e-mail or posted on a forum with indications of whether or not students have met the set deadline.

Tutor Trove Lesson

Conclusion

Online learning embodies the greatest qualities of customized learning. Through online learning, classmates like Mason and Sophia can progress in courses at their own pace, according to their strengths and weaknesses in different subjects. Teachers like Mrs. Sucy, who tirelessly strive to meet the needs and interests of each of her students, can devote more time to tracking and encouraging the progress of her students as unique individuals. Online learning empowers her as just one teacher to have several “engines” running, with students each on their own tracks – slowing down, breaking, and accelerating according to their abilities. The bottom line is leveraging technology maximizes results. Given the laptop programs and online learning programs already in place throughout our state, Maine has the potential to revolutionize education to such a degree that every student can realize his full potential.

(Download the study here)

This study looks beyond the regulations to highlight the practical impact PL90 is having for end users, the businesses and consumers who purchase private health insurance in Maine.  This is a measure all too often dismissed by critics yet perhaps the only measure that truly matters.  The following case studies illustrate the effects of specific provisions of PL90.  Names have been altered for confidentiality purposes, but the profiles are of real companies and individuals. All material details presented in the case studies are accurately portrayed.

PL90 is demonstrating who truly benefits when we free our markets to respond to consumer needs, the many individuals and small businesses in Maine who rely on private health insurance—a 56 year old woman with a newly transplanted heart able to afford her anti-rejection medications, a small business lowering their cost rather than accepting a 23 percent rate increase, and another small business able to continue providing health insurance to its employees without having to ask them for a premium contribution.

Case Study 1: Improved Individual Market

Background:

PL90 contained numerous provisions aimed at improving Maine’s individual and small group health insurance markets.  The Maine Guarantee Access Reinsurance Association (MGARA) was created to subsidize high cost claimants in the individual health insurance market.[2]  MGARA assesses $4 per month from policyholders across all insurance markets in Maine raising approximately $25 million.  This fund is supplemented with premiums paid by insurers who have high cost individuals in the reinsurance pool.

Once an individual is designated to the reinsurance pool, MGARA reimburses the insurer after the first $7,500 of claims paid, 90 percent of the next $25,000 of claims paid, and 100 percent of claims paid in excess of $32,500.

MGARA is transparent to policyholders who are unaffected by the program in terms of their coverage and premium cost.  In most cases, policyholders are likely unaware that they are in the reinsurance pool.  Their plan choices are the same as any other policyholder and their premiums are the same as a healthy individual of the same age and gender.

Profile:

Jane Doe, a 56 year old single woman, worked for a small Maine employer who offered a group health insurance plan covering Jane and four additional employees.  In the fall of 2011, Jane suffered a massive heart attack.  The attack resulted in significant irreparable tissue damage and left Jane in and out of consciousness for months in an intensive care unit first in Maine and then a hospital in Boston.

She was eventually released after months of hospitalization with a pump surgically implanted in her chest that circulated her blood while she waited on the heart transplant list.  Jane overcame many odds simply by surviving, but she would not be returning to work.

During this timeframe Jane applied for and was approved for social security disability.   She must now wait two years before she can apply for Medicare.  Her employer generously maintained her group insurance coverage for the maximum timeframe allowed under the group insurer’s eligibility rules.  Because this is a small employer ineligible under the Consolidated Omnibus Budget Reconciliation Act (COBRA), Jane found herself needing to seek coverage in the individual insurance market.

Effect of PL90:

Jane’s biggest challenge in affording individual health insurance was out-of-pocket costs.  She had sufficient savings to cover her monthly premium cost but worried about the plans additional out-of-pocket expenses.  Many plans have deductibles and out of pocket limits in the thousands and occasionally in excess of $10,000 annually.

Jane was able, however, to purchase a new individual product offered by Anthem, compatible with a Health Savings Account (HSA), that limited her annual out-of-pocket exposure to $2,600.[3]  It has been years since Anthem, Maine’s largest individual major medical insurance provider, has introduced new products.  The individual market has been steadily deteriorating, raising alarms the market could collapse entirely.  The Maine Bureau of Insurance issued a white paper detailing this problem in 2000 which was updated in 2001.[4]

MGARA has breathed new life into the individual health insurance market.  A viable market attracts investment as has been demonstrated by Anthem who introduced this new HSA product in addition to a portfolio of new products Anthem refers to as “HealthChoice Plus”[5] with premiums as much as 72% lower than products previously available.[6]  Since MGARA became operational in July of 2012, Anthem saw new products sales increase approximately 60 percent over the same timeframe in 2011.[7]

PL90 created a more stable individual health insurance market.  The result was new investment by a Maine insurer that provided invaluable coverage for an individual in need.

Case Study 2: Substitution Effect

Background:

The small group health insurance market in Maine includes several insurers who compete for market share.  Because of this, it is typical for small companies to shop their insurance coverage each year to make sure they are getting the best price.  As an insurance broker, I can tell you that small companies change insurers and products frequently, sometimes literally on an annual basis.

PL90 not only instituted MGARA and changes to insurance rating rules, it also removed barriers to new products and investment.  One provision lifted a somewhat obscure Maine law that prohibited individual Health Maintenance Organization (HMO) deductibles in excess of $1,000.  As a result, multiple insurers offered new small group HMO products including Maine’s non-profit health insurer, Harvard Pilgrim Health Care.[8]

Profile:

ABC Architecture is a small firm in southern Maine with a dozen employees.  They offer health insurance to their staff of which ten participate.  Their plan renews each year on January 1^st.  This year they faced a 23 percent rate increase from their insurer which translated to a premium increase of over $8,300.

Effect of PL90:

As shown in Table 1, instead of a 23 percent rate increase, ABC Architecture experienced an 11 percent rate decrease saving the company over $4,000 over 2012, and over $12,000 compared to their premium cost had they renewed with their existing health insurance plan. ABC Architecture shopped as they do each year and changed to one of Harvard Pilgrim’s new HMO products.  The coverage was almost identical with only a $50 increase in their employee’s annual out-of-pocket exposure.  This was a Health Savings Account (HSA) compatible plan like their previous plan, but it included an enhanced prescription benefit.

The chart below, prepared by the Maine Bureau of Insurance, shows a growing trend of health insurance rate decreases rising from less than 3 percent before PL90 to 9.4 percent in 2011 and 17.5 percent in 2012.[9]  The percentage of small businesses experiencing increases dropped in every category and the substitution effect tells us that many more companies changed products or insurers to further mitigate costs.The substitution effect of companies changing insurance plans is an important aspect of the small group health insurance market.  It demonstrates that many companies change plans and insurers to avoid or mitigate rate increases.  Given that fact, when you see data regarding rate decreases, the numbers are invariably understated.

Case Study 3: Innovation

Background:

One PL90 provision enabled the formation of a health insurance captive which allows companies to band together to manage their health insurance expenses.  One group in Maine, the Maine Wellness Association, took advantage of this provision and formed a health insurance captive called MaineSense.[10]

MaineSense provides a new option for Maine companies with a number of unique features such as employer ownership in the program.

Profile:

XYZ Builders is a commercial building contractor in central Maine.  The company has provided health insurance to its 20 employees for many years.  They still pay 100 percent of the employee premium though rate increases are threatening their ability to continue doing so.

Effect of PL90:

Concerned about historical health insurance rate increases and interested in the opportunity to participate in what they viewed as an innovative new program, XYZ Builders joined MaineSense in January of 2012.  Doing so the company held their cost level with 2012 while improving their coverage.

PL90 created the opportunity for the Maine Wellness Association to launch a new program.  That new program translated to a choice for XYZ Builders that did not otherwise exist.  Not only did XYZ Builders enjoy participation in an innovative program of which they are now a part owner, they have experienced two years of equal or lower health insurance costs, an uncommon experience for a Maine small business.The employee single plan out-of-pocket limit fell from $3,500 excluding prescription out of pocket costs to $2,550 including prescription out of pocket costs.  January first of 2013, XYZ Builders renewed their plan unchanged with MaineSense at a 1% premium decrease.

Conclusion:

Creating viable, competitive health insurance markets should not be viewed as a “gift to insurance companies,” but instead should be recognized for what they truly are—a gift to the consumers who purchase through those markets.

When we focus on policies that stabilize our insurance markets, we see rates begin to stabilize, investment in new products, heightened competition, and innovative market entrants.  We also see a 56 year old woman with a newly transplanted heart able to afford her anti-rejection medications.  We see a small business lowering their cost rather than accepting a 23 percent rate increase.  We see another small business able to continue providing health insurance to its employees without having to ask them for a premium contribution.

PL90 is demonstrating who truly benefits when we free our markets to respond to consumer needs, the many individuals and small businesses in Maine who rely on private health insurance.

Notes and Sources

Download full report (pdf)

This study uses the most recent 2010 state tax data from the Internal Revenue Service.[ii]  Whether measured as a percent of all taxpayers or adjusted gross income, Maine has fewer high-income taxpayers earning more than $200,000 or earning more than $1 million when compared to the national average or neighboring New Hampshire (which has no individual income tax).  In fact, despite having nearly identical populations, New Hampshire’s millionaires significantly outnumber Maine’s (984 vs. 513) and have more income ($4.1 billion vs. $1.3 billion).[iii]

More troubling, Maine’s high-income taxpayers have been persistently losing ground.  Between 2001 and 2010, the adjusted gross income per taxpayer for Mainers earning over $1 million grew by only 5.1 percent.  In contrast, the national average grew by 12.3 percent and in New Hampshire by a whopping 55 percent.  Despite starting at nearly identical levels in 2001 ($2.5 million in Maine and $2.7 million in New Hampshire), the average millionaire in New Hampshire has nearly double the income by 2010 ($2.6 million vs. $4.1 million).

Additionally, Maine’s high-income taxpayers show a higher incidence of business ownership through vehicles such as partnerships and S-corporations (78.2 percent of taxpayers earning over $1 million) versus the national average (74.2 percent).  Since these are “pass-through” business entities, their taxes are paid through the individual income tax returns of the owners.[iv]  Therefore, Maine’s high-income taxpayers are more likely to be a hard-working business owner who only appears to be “rich” on paper due to this pass-through business income.

Rather than raising the tax burden on high-income taxpayers, Maine’s policymakers should instead find ways to encourage them back into the state or into productive activities.  If Maine had the same number of and average income of taxpayers earning more than $200,000 as the national average, Maine’s economy would have been up to $4.8 billion larger in 2010 and had higher state individual income tax of up to $410 million (taxed at 8.5 percent).  Much of this would have been business income, meaning even greater investment, job creation, and revenue.

Unfortunately, Maine’s policymakers, over the past few decades, decided to chase an ever shrinking pie of high-income dollars with ever higher tax rates.  This has created a vicious cycle where Maine’s high-income taxpayers are now fewer in number and poorer in income when compared to the national average or with neighboring New Hampshire.  Governor LePage’s reduction of the top individual income tax rate to 7.95 percent from 8.5 percent was an important step in reversing this vicious cycle and helping to grow the economic pie for all Mainers.

Maine Has Fewer and Poorer High-Income Taxpayers

Chart 1 and Table 1 show that Maine has fewer high-income taxpayers as a percent of all taxpayers in 2010.  Taxpayers earning over $200,000 in Maine account for 1.9 percent of all taxpayers, which ranked as only the 41^st highest in the country.  The number of these taxpayers in Maine was 63 percent of the national average and 59 percent of New Hampshire.

Taxpayers earning over $1 million in Maine accounted for 0.08 percent of all taxpayers, which ranked as only the 48^th highest in the country (ahead of Mississippi and West Virginia).  The number of these taxpayers in Maine was 42 percent of the national average and 55 percent of New Hampshire.

Maine clearly lags significantly behind in the number of high-income taxpayers.

This is the first of a three-part series on customized learning in Maine. Download the report here.

By Amanda Clark

MHPC Education Policy Analyst

Customized learning is a student-focused system where kids enroll in the curriculum which best meets their educational needs.  Customized learning is not new and, in fact, is at the heart of Maine’s well-rooted educational history going back to the days of town academies.  Unfortunately, this individualized method of education never fully flourished to its full potential where every Maine child could thrive in a customized learning environment.

More than ever, Maine needs creative solutions for today’s kids.  Maine now faces a “Demographic Winter” where the shrinking number of children threatens the very sustainability of the current population level and economy.  As a consequence, falling student enrollments will mean fewer educational opportunities for today’s children.  Yet, specialized career interests, Gifted and Talented programs, apprenticeship opportunities, foreign language courses and more are all what make individual schools unique—almost as unique as the individual needs of our children.

For the sake of our kids and for the sake of Maine’s future, customized learning is the best way to grow our students and our economy.   Already a few tentative steps have been taken toward building a greater customized learning environment with the recent introduction of charter schools and online learning.  More still needs to be done.

This is the first study of a three-part series examining customized learning in Maine.

The second study will highlight successful examples of customized learning in Maine.  The third study will lay out a policy roadmap to customized learning for all Maine children.

Early Customized Learning: Town Tuitioning

Throughout the late 1700s and the 1800s, many private insitutions of learning, known as Maine’s town academies or independent schools, sprouted with various purposes concerned with the needs of children.  Some schools were founded on religious grounds, some

offered comprehensive boarding programs, and even one, the Carrabassett Valley Academy, originated as a tutoring establishment for those training in the arts of winter sports on Sugarloaf Mountain.

Berwick Academy was Maine’s first academy, founded in 1791, nearly thirty years before Maine became a state.  The people of Berwick, York, Kittery, Rollinsford, Portsmouth and Wells got together and financed the founding of Berwick Academy, to educate the “deplorable youth in this part of the country.” To give you an idea of Berwick Academy’s historical timeline, recall that also in 1791, the United States Bill of Rights was passed, King Louis XVI swore an oath as a “constitutional king” during the French Revolution, and Congress created the United States Mint.

The other 11 academies which continue to serve Maine’s students today are:

• Carrabassett Valley Academy (1982)
• Erskine Academy (1883)
• Foxcroft Academy (1823)
• Fryeburg Academy (1792)
• George Stevens Academy (1803)
• Gould Academy (1835)
• Hebron Academy (1804)
• Lee Academy (1845)
• Lincoln Academy (1801)
• North Yarmouth Academy (1814)
• Thornton Academy (1811)
• Washington Academy (1792)

Following an 1873 law which provided for the receipt of state aid by public schools, Maine’s legislature mandated in 1903 the local towns’ responsibility for the education of their respective residing school-aged kids.  Even with state aid, many of the towns, especially those in rural Maine, could not afford to build a local high school.  The solution in these situations was the ability for the child’s town of residence to send a “tuition” payment with each child to the public or private, religious or non-religious school of his choice.  Of course, many of the private schools at that time happened to be town academies.  Although many of the academies initially did have religious grounding and affiliations, over time, they secularized their missions.  Since 1980, due to a ruling by Maine’s highest court, religious schools may no longer obtain public funds.

(Download the case study here.)

Depending on how many employees become eligible for Obamacare, the company would be compelled to spend either 54% or 134% of its profit margin to pay for health insurance. In the first scenario, spending more than half of the company’s profit margin on Obamacare would result in layoffs and other drastic cost-cutting measures.

In the second scenario, if the company had to spend 34% over and above its entire profit to fund Obamacare, it simply could not stay in business.

In the third scenario, the company could drop health insurance all together and pay the Obamacare penalties. But that would still cost the company 90% of its profit margin.

The Maine company analyzed for this case study is a retail business with 78 locations in Maine, New Hampshire and Vermont. The company employs an average of 800 employees, including 650 full-time employees who are eligible for the company’s health insurance plan. Presently, 160 of full-time staffers now participate in the health insurance plan, costing about $800,000 annually.

The case study analyzes the effect of an additional 368 employees joining the plan under Obamacare. In the first scenario, health insurance costs would increase $1.85 million annually. In the second scenario, costs would increase $744,000 each year. By dropping health insurance coverage, the company would have to pay annual Obamacare penalties of $1.24 million.

“Regardless of the intentions of Obamacare, the end result is that these higher health insurance costs amount to a ‘success tax’ on the company,” said Joel Allumbaugh, author of the case study and director of the Center for Health Reform Initiatives at The Maine Heritage Policy Center. “Naturally, this company is in business today because it has successfully met the needs of the marketplace and has justifiably earned a small profit as a reward for taking a risk.”

But the best-case scenario would cut this company’s profit margin in half. “Without cost reductions, such as lay-offs, the company would eventually be forced into bankruptcy,” Allumbaugh said. “In the worst-case scenario, the company’s health insurance cost would consume all of its profit margin, and the company would have to borrow money just to stay afloat. Not only would the employees not have health insurance, but they wouldn’t have a job, either.”

For more information about this case study or Obamacare, contact Joel Allumbaugh at jallumbaugh@mainepolicy.org.

A case study from a blueberry farming operation in Maine shows that providing health insurance benefits under Obamacare would result in a staggering annual increase of more than $184,000. (Download PDF of full case study here.)

Due to the crushing mandates of Obamacare, this farm would face a whopping 203% increase of in the cost of providing health insurance benefits.

The blueberry farm now pays $90,540 a year to provide health insurance for its full-time employees. Under Obamacare, the farm could pay as much as $274,762 to cover both full-time and seasonal part-time employees—an annual increase of $184,222.

However, if the blueberry farm chose to drop health coverage all together, Obamacare would impose a penalty of $76,250 on the business. That’s a 16 percent drop in what the blueberry farm now pays for health insurance.

Since the penalty would be significantly lower than the cost of providing health insurance under Obamacare, the blueberry farm would most likely choose not to offer health insurance at all.

Also, this case study does not account for the administrative costs the farm would incur to manage Obamacare’s eligibility rules, which in the case of seasonal workers would be significant.

“This case study of a real business in Maine demonstrates how Obamacare will force higher health insurance costs on employers, which will result in fewer jobs for Maine people,” said Joel Allumbaugh, author of the case study and director of the Center for Health Reform Initiatives at The Maine Heritage Policy Center. “It is shameful that politicians in Washington, D.C. did not investigate the devastating effects Obamacare would have on businesses before enacting it.”

This is the second of MHPC’s case studies on the negative effects Obamacare will have on real businesses in Maine. (See the first case study here.)

For more information about this case study or Obamacare, contact Joel Allumbaugh at jallumbaugh@mainepolicy.org.

The Maine Heritage Policy Center released the 2012 Maine Piglet Book today, detailing hundreds of millions of dollars of wasteful government spending. A new version of a similar publication released in 2009, the 2012 Piglet Book highlights government’s big-spending habits, as well areas where leaders can save taxpayers big money.

Download the Full 2012 Maine Piglet Book (PDF)

The Maine Turnpike Authority, the Maine State Housing Authority, “Welfare for Politicians” and stipends given to UMaine employees are just a few of the examples of excessive government spending highlighted in the 2012 Maine Piglet Book. The Piglet Book reports that the University of Maine alone handed out more than $10 million in “stipends” in 2011, while the “clean elections” program has expended than $23 million over the life of the program, landing several participants in jail.

The Piglet Book also highlights the dramatic growth in government salaries in the last decade. In 1997, just 53 state employees took home more than $100,000 in compensation. That number jumped to an all-time high of 435 in 2009, before settling at 344 in 2011. The $1.5 billion handed to Maine as part of the federal “stimulus” package is also featured in the book, including details about how that money was spent.

We’re excited to make this book available to the citizens of Maine once again so they know how their tax dollars are being spent, said Scott Moody, CEO at The Maine Heritage Policy Center. Unfortunately, taxpayers won’t be too happy with all the ways their hard-earned tax dollars have been used. The 2012 Maine Piglet Book is full examples of why we need to rein in government spending and crack down on waste and abuse of public funds.

The 2009 Maine Piglet Book was one of the first publications to highlight wasteful spending at The Maine Turnpike Authority, pointing out lavish spending on “rest stop artwork” and a brand-new multi-million-dollar office. At the time, supporters of big-government spending and the Turnpike director dismissed the report. In the newest Piglet Book, the Maine Turnpike Authority is featured prominently—this time for felony theft by the Turnpike’s director, who is now serving a prison term.

Whether it’s the hundreds of millions we waste in overemployment and overpayment to state employees, the millions blown on carbon-trading schemes or the thousands we waste on ‘dance festivals,’ Maine can’t afford to continue wasting taxpayers hard-earned money, Moody said. The 2012 Maine Piglet Book will help taxpayers and politicians alike understand that Maine spending is not ‘cut to the bone’ as many will claim, and it will help begin to identify where we can find savings for hard-working Mainers.

Download the Full 2012 Maine Piglet Book (PDF)

Obamacare is, first and foremost, an affront to liberty-loving Americans who cherish their Constitutional right to determine their own healthcare.[i]  Obamacare puts liberty on the back burner in pursuit of a one-size-fits-all healthcare system to lower healthcare costs and, in the end, to boost job-creation.  However, as this first of three case studies will show, Obamacare will actually increase costs on employers which, in the long run, will mean fewer jobs.  As such, Obamacare’s much-touted health and economic benefits are simply not worth crushing American liberties and should be repealed.

Download full case study here (PDF)

Company Profile

The Maine company utilized for this illustration is a concrete company largely serving commercial construction contracts.  The company employs approximately 60 full-time year-round employees consisting of 10 employees working in the office or company headquarters and 50 working on job sites.

In the summer during the construction season, the company adds on average another 25 field positions, which increases the workforce on job sites to 75.  However, given the transient nature of the construction workforce, the company may actually hire up to 50 people in the summer—adding another 25 employees for the summer construction season.  Approximately half of the employees hired for the summer will leave the company within 30 to 90 days (25 employees), while the remainder will stay on for six to eight months (25 employees).

Pre-Obamacare Eligibility:  New employees become eligible for the company health insurance plan if they work, on average, at least 40 hours per week and have satisfied a six-month waiting period.

Total Eligible for Health Plan Pre-Obamacare: 

• There are 60 full-time year-round employees, but 25 of them waive the employer health insurance because they have coverage elsewhere or simply choose not to participate.
• There are 10 seasonal employees who work long enough to satisfy the six-month waiting period and qualify for health insurance coverage for an average of one month.

Table 2 translates the number of employees enrolled in health insurance into the total number of months they are enrolled during the year, based on the numbers outlined above.  Therefore, 35 employees enrolled for the entire year represents 420 (35 times 12) coverage months, while 10 employees enrolled for an average of one month of the year equals 10 (10 times 1) coverage months—for a total of 430 months.  This 430 months of health insurance coverage will be used to analyze the cost impact for the employer when the waiting period for health benefits is reduced to comply with Obamacare.

Post-Obamacare Eligibility:  New employees are considered eligible for the company health insurance plan if they work, on average, at least 30 hours per week and have satisfied a two-month waiting period.  Obamacare also redefines a full-time employee as working, on average, 30 hours per week.  Waiting periods cannot exceed 90 days from the hire date under Obamacare; therefore, the company waiting period must change to the first of the month following 60 days from the hire date—significantly reducing the waiting period in the real world.

The Obamacare employer mandate applies to all companies with 50 or more full-time employees, which qualifies this employer for all 12 months of the year.

Total Eligible for Health Plan Post-Obamacare:

• There are 60 full-time year-round employees, but 25 waive the employer health plan because they have health insurance coverage elsewhere or simply choose not to participate.
• There are 30 seasonal employees who work long enough to satisfy the 90-day waiting period and qualify for health insurance coverage for an average of four months.

Table 3 shows 35 employees enrolled for the entire year represents 420 (35 times 12) coverage months, but now includes 30 employees enrolled for an average of four months of the year equals 120 (30 times 4) coverage months—for a much higher total of 540 months versus  pre-Obamacare.

Health Plan Annual Cost

This employer offers a Health Savings Account (HSA) compatible health plan.  The employer contributes to the cost of the health plan premium.  In addition, the employer deposits money into individual Health Savings Accounts on behalf of employees and funds a portion of the plan out-of-pocket costs via a Health Reimbursement Arrangement (HRA).

To analyze the cost impact of Obamacare, the percentage participation in each coverage level was calculated, as was the employer monthly cost for the health plan, HSA and HRA.  An HRA is a promise by the employer to pay a portion of health care out-of-pocket costs.  Since expenses incurred will differ among employees year to year, the HRA represents a variable cost.  Therefore, the analysis utilizes the industry average HRA utilization of 30% and a monthly administrative cost of $5 per employee per month.

The annual HRA benefit equals $1,500 for employees covered as singles on the health plan and $3,000 for employees covering dependents on the health plan.

Table 4 below shows the four health plan coverage levels followed by the percentage of employees enrolled in each coverage level.  The third column shows the total monthly cost of the health insurance plan; and the fourth column illustrates the employer monthly contribution toward the health plan premium.  The next two columns show the employer monthly contribution to employee Health Savings Accounts and the monthly cost of the HRA.  The employee monthly total column is the sum of the employer premium contribution, HSA contribution and HRA expense.  This represents the total monthly cost per employee.

Table 2 above identifies a total of 430 coverage months.  This is multiplied by the percent of employees enrolled at each coverage level to arrive at the number of employee coverage months in the second to last column.  The final column illustrates the annual employer cost for each level of coverage and totals the employer annual cost below.  (Example: 283.8 employee only coverage months times $204 monthly employer cost = $57,753)

Higher Employer Costs from Obamacare

This case study primarily analyzes the impact of the Obamacare provision that requires employers to offer coverage to new employees no later than 90 days from the hire date.  This provision has a particularly acute impact on companies that currently impose a longer waiting period, which is common in the construction industry where employee turnover is high.

In the case of this particular company, based on the assumption that the health care plan benefits and cost remain constant, the annual cost increase because of Obamacare is almost $30,000.  This represents a 27% increase in the cost of providing health insurance benefits. It is interesting to note that if this employer chose to drop health coverage all together, the tax would fall somewhere between $60,000 and $110,000, which is significantly lower than their post-Obamacare health insurance cost of $137,932. By this accounting, some employers would find themselves faced with the need to drop health insurance altogether to keep from facing higher costs.

This analysis also does not account for the administrative costs associated with managing Obamacare eligibility rules, which in this case would be quite significant.

Conclusion

It is unfortunate that America’s policymakers did not thoroughly vet Obamacare before enacting it to verify that its grandiose economic claims of lower health insurance costs and increased jobs were based in reality.  Instead, Americans are now saddled with Obamacare and its unintended consequences. This case study of a real company finds that Obamacare will actually mean higher health insurance costs to employers and, in the long run, fewer jobs.  Liberty-loving Americans who value control of their own healthcare must demand that policymakers repeal Obamacare as soon as possible.

Methodology

This study makes a number of conservative assumptions:

First, the analysis assumes that the current health plan will meet minimum essential benefit and actuarial value standards as established by Obamacare and that employer contributions are adequate to meet minimum contribution requirements.  If either of these assumptions is false, the cost of the health plan could increase prior to considering the cost impact of covering a larger percentage of the workforce.

Second, the analysis also does not account for the fact that some of the employees currently eligible for, but who waive coverage, may join the company health plan to avoid penalties associated with the individual mandate, further adding to the employers cost.

Finally, the analysis also assumes that the employer in this case is not using the safe harbor provisions for calculating variable hour employees, which could potentially delay eligibility for their seasonal workforce.

Download full case study here (PDF)

A case study from a real business in Maine, a commercial concrete business serving the construction industry, shows that providing health insurance benefits under Obamacare would result in an annual increase of almost $30,000.

Download full case study here (PDF)

Due to the requirements mandated by Obamacare, this small business would face a 27% increase in the cost of providing health insurance benefits. The business now pays a total of $109,022 a year to provide health insurance for its employees.

Under Obamacare, the business would pay $137,932—an annual increase of $28,910.

However, if this company chose to drop health coverage all together, the penalty that Obamacare would impose on the company would total between $60,000 and $110,000. Since that amount could be significantly lower than the cost of providing health insurance under Obamacare, the company may choose not to offer health insurance at all.

Furthermore, the case study does not account for the administrative costs the business would incur to manage Obamacare’s eligibility rules, which in this case would be quite significant.

It is unfortunate that America’s policymakers did not thoroughly vet Obamacare before enacting it to verify that its grandiose economic claims of lower health insurance costs and increased jobs were based in reality, said Joel Allumbaugh, author of the case study and director of the Center for Health Reform Initiatives at The Maine Heritage Policy Center.

Instead, Americans are now saddled with Obamacare and its unintended consequences, he said. This case study of a real company finds that Obamacare will actually mean higher health insurance costs to employers and, in the long run, fewer jobs. Liberty-loving Americans who value control of their own healthcare must demand that policymakers repeal Obamacare as soon as possible.

For more information about this case study or Obamacare, contact Joel Allumbaugh at jallumbaugh@mainepolicy.org.