Insurance increases blocked Schaefer promises new state plan


Gov. William Donald Schaefer said yesterday that he is halting a controversial plan to raise the health insurance premiums of state employees until his administration comes up with a new proposal for dealing with rising costs.

In a slap at Personnel Secretary Hilda E. Ford, the governor also stripped the job of administering the insurance program from her department, handing it to Budget Secretary Charles L. Benton Jr. Mr. Benton is charged with finding an alternative to a fivefold premium increase in the most popular health coverage for state employees.

"We're going to come up with some ideas on how to handle this situation," Mr. Schaefer said during his weekly radio show on WBAL-AM. "We'll have an answer by the first of the year, maybe sooner. So the main thing is, just hang in there."

Ms. Ford's department had planned to put a schedule of fee increases into effect Jan. 1. But when state employees learned Tuesday through news reports that the most popular Blue Cross/Blue Shield plan would go up as much as five times, they jammed phone lines in Annapolis.

The plan, known as the Preferred Provider Network, covers most of the state's workers, including 40,000 active and 18,000 retired employees. A family of three or more currently pays $26 every two weeks for the coverage. Under the now-dead premium increase, the same family would have paid $147.

Many have described the plan as the Cadillac of health coverage. It pays all "reasonable" medical expenses, except for a small co-payment for some procedures, as long as employees stay within a network of participating providers.

Taxpayers were budgeted to pay $261 million for the plan this fiscal year. But costs have been much higher than projected. At the current rates, the state will face a deficit of $40 million by the end of the fiscal year in June, state personnel officials have said.

In addition to rising health care costs, it appears that use of the plan has outstripped the Department of Personnel's projections, said Page W. Boinest, the governor's press secretary. Part of Mr. Benton's job will be to determine how the self-insured program got into trouble in the first place, she said.

While the governor criticized the short notice and magnitude of the premium increases, he also made clear that the state could not continue to subsidize the program the way it has.

"What we cannot do is find $40 million and plug it into the plan," he said during the broadcast.

His chief of staff, Paul E. Schurick, said the same thing in plainer words Monday night in a memo he wrote to agency and department heads in expectation of the furor.

"The cost of this program has skyrocketed . . . and the state's share has become unaffordable," Mr. Schurick wrote in the memo, a copy of which was obtained by The Sun.

Mr. Schurick noted that the state has traditionally paid 85 percent of workers' health care premiums -- regardless of the cost of their insurance plan.

Most of the plans now offered are relatively inexpensive health maintenance organizations. But the preferred provider plan has freedom of choice and virtually unlimited care, Mr. Schurick wrote.

"High-end health care programs . . . have become unaffordable and a thing of the past; the private sector abandoned these expensive, business-as-usual programs long ago," he wrote.

During a meeting with legislators Tuesday, Ms. Ford said that many of the complaints she received this week were not from state employees, but from taxpayers angry that the state was heavily subsidizing a plan with so few controls on spending.

Mr. Schaefer said yesterday that he had not known of the size of the premium increase until he learned about it through the news media.

"That was something they did not tell me," he said. "All of a sudden I read it in the paper and hear it over the radio, and I don't like that at all."

Union officials said that they found the governor's comments yesterday reassuring.

"Naturally we are very pleased," said William H. Bolander, executive director of the American Federation of State, County and Municipal Employees (AFSCME) Council 92 in Baltimore, which represents about 10,000 state workers.

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