Effect of insurance law unclear


Less than a month before a state law defining health insurance benefits for small-business employees goes into effect, insurance industry representatives say it's still unclear whether it will achieve its aim of reducing costs and encouraging more business owners to buy health insurance.

Yesterday, the state announced that it approved the standardized benefits package from 10 companies, including the "heavy hitters in the market," said state Insurance Commissioner Dwight K. Bartlett III. Mr. Bartlett said his division was working hard to review and approve plans from 49 other insurance companies by July 1.

Also facing the deadline are insurance brokers and many small business owners, who must decide whether to buy the new plan or drop coverage for their workers by the deadline.

"There's a lot of nervousness out there in the marketplace," said Sandy Beard, manager of small group reform products for Blue Cross and Blue Shield of Maryland.

The new law doesn't force small businesses to pay for insurance, as the Clinton health reform proposes, but it is meant to make it easier to obtain.

The 1993 law requires insurance companies selling to small businesses to offer the standard health benefits package designed by a state commission. It calls for insurance companies to combine all their small groups and set one rate for everybody, regardless of health, a process known as community rating. The law's backers hoped coverage would then be easier to get and less expensive.

But it's also possible that rates could go up for many people, state and industry officials concede.

The law's effects will become clearer later this month, as rates become public and more companies' packages are approved by the state.

Mr. Bartlett, noting that only 28 insurance carriers signed up when a similar program began in Connecticut, said he was pleased by the "very healthy response" from the industry in Maryland and predicted it would boost competition.

A study by an actuary predicted savings of between $375 and $1,379 per employee, depending on the restrictions on how care is provided.

But Mr. Bartlett acknowledged prices for some small-business owners could rise. Most likely affected are those now paying lower rates because no one in the group has a serious medical condition that is covered under the insurance.

Most likely to see a decrease in rates are groups in which one or more employees do have medical problems.

Shelley Arnold, executive vice president of Independent Insurance Agents of Maryland, said a quote for her five-person office came in 25 percent lower than the current bill.

"It will be a real boost for some people," she said, "but I do think it will increase the cost," since guaranteeing access to health insurance will require healthy people to subsidize costs of people now excluded.

The reform affects businesses that have from two to 50 employees whose insurance renews July 1 or thereafter. Eventually, thousands of small businesses will have to either switch to an approved product or drop health insurance altogether, and many owners are unaware of the changes, insurance agents and company officials say. Some predict the number of insured workers in the state could actually drop as insurers experiment with setting rates.

"We are going to have total chaos here for a while," said Lynda Sussman, co-owner of C. O. B. Inc., a Towson-based broker to insurance agents. "We are also going to have a lot of people without insurance. I think it is going to take two years to sort out," she said.

Businesses can obtain a brochure answering questions about the new law by calling the Maryland Insurance Administration, 333-6300, or the Health Care Access and Cost Commission, at 764-3460.

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