Premiums for individual and small group health insurance plans will rise by 8 percent and 9 percent, respectively, next January. However, the premium increases are not as high as this year’s double-digit increases, nor as high as originally proposed by insurance companies.

Bob Carey, head of the Maine Bureau of Insurance, recently approved health insurance rates that will take effect Jan. 1, 2025. The bureau worked with health insurers such as Anthem, Harvard Pilgrim and Taro Health to reduce their originally proposed rates, a news release said. The approved rate increases were reduced from a proposed average increase of 14.2 percent across various providers to an average increase of 8.6 percent for individuals and from the proposed average increase of 14.5 percent to an approved average increase of 9.4 percent for small employers with fewer than 50 employees.

“It’s a lot. Yes, of course. “It’s better than in 2024, when it was almost 15 percent, but I don’t think anyone is happy,” Carey said of the 2025 increase.

For the coming year, the bureau also asked insurance companies to take into account regional economic differences in Maine that affect insurance premiums between the southern and northern parts of the state. Insurance companies charged nearly 25 percent more for insurance in the northern part of the state, even though the southern part of the state was much wealthier.

As a result of the bureau’s intervention, individuals and small groups in Aroostook, Hancock and Washington counties will see very small or no premium increases in 2025 compared to other parts of the state.

“Over time, it became apparent that, for competitive reasons, the airlines were essentially charging more in these three northern Maine counties than in the southern Maine counties,” Carey said. “So we are narrowing the gap between the rates in these three counties and those in the rest of the state.”

Depending on an individual’s income level and insurance plan, the increases would not affect everyone equally, Carey said. People who qualify for subsidies based on their income may not see an increase at all.

Why insurance premiums are rising

According to the office’s press release, three factors are crucial for how much insurance premiums will rise.

The first factor is the price of the service, i.e. how much hospital fees, healthcare provider fees and prescription drugs cost. The second factor is the use of the services, i.e. how often people visit the emergency room and how many outpatient surgeries there are, for example. And the last factor is the service mix – what and how people are treated.

Two main reasons for the increase in costs this year are prescription drugs and hospital and healthcare provider costs, which are higher due to both price and usage.

“We need to get drug manufacturers to pay a larger share of the cost than consumers and insurers,” said Courtney Cowan, an independent insurance consultant in Maine. “If we could ever get that passed into law, we would probably see different insurance structures.”

Maine’s reinsurance program, which uses state and federal funds to reduce premiums, allowed the bureau to negotiate lower premium increases, Carey said. Essentially, federal and state money — to the tune of $70 million a year — covers the cost of some claims, allowing insurance companies to seek reimbursement from those funds and avoid premium increases.

Without reinsurance, premium increases for 2025 would almost double, Carey said.