The Ehrlich administration is circumventing a law that freezes health costs and benefits for state employees, meaning 100,000 workers and retirees could soon pay more for doctors' visits, treatments and drugs.

Seeking to shield state employees from soaring health care costs, fiscal leaders in the Democrat-controlled General Assembly this year inserted a restriction in the state's $23.6 billion spending plan over the objections of aides to Gov. Robert L. Ehrlich Jr.

Health, dental, mental health and prescription drug plans must provide workers with the same level of benefits at the same cost in 2005 as in 2004, the budget bill says, unless union representatives and state officials agree on changes.

But in an effort to control state spending, Ehrlich and the Board of Public Works approved new health care contracts this month that increase co-payments in many plans from $5 to $15 for primary care visits and impose $50 emergency room fees for the first time for many workers.

The new contracts appear to reduce benefits in areas such as dental coverage, and workers are awaiting notification of expected premium increases. Higher prices and reduced coverage are scheduled to start Jan. 1., after an open enrollment period.

Union and legislative leaders say they were stunned by what they are calling a unilateral decision, and are scrambling to convince the administration to comply with the budget bill. Administration officials responded that they consider the law invalid.

The skirmish is the latest between the Republican governor and the state employee labor unions, which have traditionally supported Democrats. Ehrlich recently won a court case invalidating labor contracts negotiated in the closing hours of his predecessor's administration.

Sen. Ulysses Currie, chairman of the Senate Budget and Taxation Committee, has summoned Budget Secretary James C. "Chip" DiPaula Jr. to a hearing Tuesday to explain the situation.

"The committee is quite concerned," Currie said, "and we want some answers."

During a hearing on the health issue this year, DiPaula told lawmakers he was working on a plan to contain costs and would return with solutions, Currie said.

"That did not happen," the Prince George's County Democrat said. "The secretary said to us, `We are trying to work this thing out.' ... He did violate the spirit of the hearing, and he violated the language of the joint chairman's [budget bill] report."

Provisions inserted by lawmakers into the spending plan, called "budget language" in Annapolis parlance, have the force of law, Currie and others said.

But the administration says it is not bound by the restriction because it would increase state spending, and because it is worded in a way that exceeds the Assembly's authority.

Under Maryland's unique budget laws, the General Assembly can only cut from the budget submitted by the governor and cannot add spending unless it identifies a revenue source to pay for it.

Freezing workers' co-payments would increase state spending on employee health care, said Cecilia Januszkiewicz, deputy secretary of the Department of Budget and Management.

Additionally, Januszkiewicz said, the budget language restricts premium increases and other costs through all of 2005, though the bill is valid for only the 2005 fiscal year, which ends June 30.

"The General Assembly doesn't have unlimited powers to do whatever it wants in the budget," she said.

DiPaula, the budget secretary, said charging higher co-payments would save taxpayers "millions," but he could not immediately provide a specific figure.

The fiscal 2005 budget increased health care spending by $22.8 million over the previous year, but that is $47 million less than what legislative analysts say is necessary for "status quo" coverage. If the state doesn't reduce coverage or charge workers more, it will have to make up the difference by dipping into savings. State and local governments everywhere are grappling with similar health care issues, as are companies.

Co-payments for primary care visits are rising to $15 in six point-of-service and health maintenance organization options for workers, Januszkiewicz said. While biweekly insurance costs have not been finalized, "I would say it is likely that premiums will go up because we live in a world where health care costs go up every year," she said.

Higher employee health costs would negate the $752 pay increase state workers received this year, their first raise in three years, said House Speaker Michael E. Busch. He criticized the governor for using the three-member Board of Public Works to overturn the will of the legislature. The board is composed of Ehrlich, Comptroller William Donald Schaefer and Treasurer Nancy K. Kopp.

"The biggest issue is the erosion of representative democracy," said Busch, an Annapolis Democrat. "You have 188 people that reach an agreement with the executive on the budget, and you have a group of three people changing the law."

Kopp, who represents the legislature on the board, said she voted for the contracts after being told that discussions between the unions and the administration had taken place. But she said she thought the changes were relatively minor, compared with other alterations that DiPaula testified were looming.

"I think its worthwhile to have a hearing to go through these things, to air the potential changes that may be made," she said.

The largest state employee union, AFSCME Council 92, has asked Ehrlich to suspend any reduction in benefits.

"Our goal is to stop this," union President Sally Davies said in an interview yesterday. "He just seems so intent not to bargain with us or consider this, even though it is the law."

While the courts could be asked to settle the dispute, the union said it hopes to avoid a legal tussle.