Insurance law goes into effect today

THE BALTIMORE SUN

The rules for selling health insurance to small businesses in Maryland change today, bringing to an end a decade of industry practices such as "cherry picking" -- covering only healthy people -- that have led to a growing number of uninsured.

Under a new law aimed at making health coverage more available, insurance companies must offer a mandated package of benefits at a uniform rate to any employer of between two and 50 eligible workers.

But unlike other states that have re-introduced community rating -- the practice of setting one price for all comers -- Maryland has allowed insurers to adjust their approved rates based on age and whether or not they live in high-cost areas of the state.

What's uncertain is whether the new law will make coverage more expensive or cheaper, and as a consequence either prompt more businesses to provide insurance or force those that currently do to drop it.

"Obviously we are all holding our breath as to whether this is working or not, but we won't know probably for a year or two," said Maryland Insurance Commissioner Dwight K. Bartlett III.

Early indications were that in many cases, businesses were finding their premiums higher -- sometimes substantially so -- under the new rules. But with new players entering the market daily as they win approval from state regulators, industry insiders say they are beginning to see some dramatic differences in price among insurers. And they say prices will be adjusted as insurers get a better feel of their markets.

"There is something to be said for comparison shopping and looking at what all the different players in the market are going to be offering," said Roy Wilkinson, president of Wilkinson Benefit Consultants Inc., a Towson consultant.

"These companies will come out of the gate with the rates, and six months down the road will refile as they get more experience," he predicted. "So we are going to look at 12 to 18 months of fluid and volatile changes."

Nearly three dozen companies offering 41 various types of coverage have entered the fray thus far. Their policies and prices reflect different strategies and expectations for business. As of yesterday, 23 of the 32 insurers with standard benefit packages had been approved by regulators.

For insurers, the stakes are high: they could lose market share immediately if rates are too high, "if actuaries created too much of a fudge factor," Mr. Wilkinson said.

Those that already take people with medical problems, such as Employers Health Insurance, a division of the publicly traded EMPHESYS Financial Group Inc., could find the reform a boon. The company specializes in small-group insurance and already covers nearly 30,000 in Maryland under the same terms as those mandated by the reform -- no medical underwriting, no wait for coverage of pre-existing conditions and only small variations in price due to age or geography.

In pricing the new standard package, the Green Bay, Wis., insurer assumed medical risk now will be spread among more companies. As a result, unlike some other insurers, it forewent a large increase now in favor of spreading its risk over three years, said Mardsen Kucera, sales manager for Maryland, Virginia and Delaware.

"We believe guaranteed issue is a good thing to happen in the industry," she said, referring to the requirement that insurance companies now must sign up anyone who applies. The company received 100 requests for rate quotes the first two days it was on the market last week and already has signed up some new groups, she said.

Other insurers, such as Optimum Choice Inc., whose parent, Mid Atlantic Medical Services Inc., has earned hefty profits weeding out groups whose members have high medical expenses, the change could be more difficult. To win new business, it has set more lenient participation requirements than some competitors, signing up a group for its HMO, for instance, if only 25 percent want to participate. The hope is others will sign on with the insurer in subsequent years. "We are all feeling our way a little bit," said George Yochum, chair of MAMSI's board and president of Optimum Choice.

Blue Cross and Blue Shield of Maryland, an historic leader in community-rated products and in the small-group market, has introduced the widest variety of standard benefit products in a bid to appeal to everyone. The insurer declined to release its market share, but brokers estimated it at about 40 percent of the small business market, down from 70 percent or more in 1970.

Prices were set by the same formula it always uses, the company said. It weighs experience in the marketplace with certain products and expectation of medical risk, said Rita Costello, vice president for marketing and product development.

The Maryland reform has attracted at least one new entrant into the small group market -- Maryland Fidelity Insurance Co., which shied away until now because of the intensive marketing that was required.

But the new standard benefit plan can be sold on price, and "that's exciting to us," said Mitchell Diamond, president of Maryland Fidelity. The Towson firm for the past decade has administered health plans for large self-insured employers and provided health care wholesale through the Health 2000 network.

It priced its small-group benefit plan based on its experience with the 60,000 people in its self-insured employers and the HMOs it services. There are no pre-existing condition penalties in the group, and the HMOs already service small businesses.

Many businesses whose policies expire today were invited to sign up at pre-reform prices yesterday by their current insurers where those insurers' new products had not yet been approved.

Others are choosing the new standard benefit package offered by their current carriers with the idea of reviewing the situation again in two or three months when more choices are on the market, said Frank Kelly III, president of the insurance firm Kelly-Chick & Associates, Inc.

"Right now one plan appears better than another, but in a week or so, that could all change," he said.

SAMPLE INSURANCE RATES

Beginning today, insurance companies that sell group coverage must offer a mandated package of benefits at a uniform rate. The Sun asked approved insurers to provide two sets of rates on the package for a sample small business -- one set of rates for Baltimore and a second set, if different, for the Eastern Shore. The sample business has 25 employees, with an average age of 40.

Insurers may offer the benefits package four ways -- traditional indemnity insurance and three forms of managed care: health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point of service (POS). Their estimates for monthly premiums follow. Eastern Shore rates are in parentheses. Actual rates could vary, depending on the ages of a group's members and the weight an insurer gives to age and geography.

K? (-- indicates company does not offer this type of coverage)

BLUE CROSS and BLUE SHIELD of MARYLAND

Coverage .. .. .. ..HMO .. .. ..PPO .. .. .. POS .. .. Indemnity

Individual .. .. see below .. $207 ($176) .. -- .. .. .$210 ($179)

Family .. .. .. .see below .. $537 ($458) .. -- .. .. .$547 ($466)

Blue Cross HMO rates

.. .. .. ..CareFirst .. Columbia Medical .. Delmarva ..Free State

.. ... ... ... ... ... ... ... ... .. ... .... ... ... .. ... ... Potomac

Individual . $131 .. .. $138 .. .. .. .. .. $141 .. .. $138 .. .. ..$139

Family .. .. $393 .. .. $415 .. .. .. .. .. $422 .. .. $413 .. .. ..$416

CHESAPEAKE HEALTH PLAN

Coverage .. .. HMO .. .. .. PPO .. .. POS .. .. .. Indemnity

Individual .. $137 .. .. .. -- .. .. ..* .. .. .. .. --

Family .. .. .$413 .. .. .. -- .. .. ..* .. .. .. .. --

EMPLOYERS HEALTH INSURANCE

Coverage .. HMO .. .. .. PPO .. .. .. .. POS .. .. .. Indemnity

Individual ..-- .. .. .. $114 ($94) .. $109 ($89) .. $142 ($117)

Family .. .. -- .. .. .. $317 ($261) ..$302 ($248) ..$394 ($324)

MARYLAND FIDELITY INSURANCE CO.

Coverage .. .. HMO .. .. ..PPO .. .. .. .. ..POS .. .. .. Indemnity

Individual .. -- .. .. ..$125 .. .. .. .. ..-- .. .. .. .. --

Family .. .. .-- .. .. ..$392 .. .. .. .. ..-- .. .. .. .. --

NATIONWIDE LIFE INSURANCE CO.

Coverage .. .. HMO .. .. .. ..PPO .. .. .. .. ..POS .. .. .. Indemnity

Individual .. -- .. .. .. $173 ($164) .. .. ..-- .. .. .. 182 ($173)

Family .. .. .-- .. .. .. $512 ($485) .. .. ..-- .. .. .. $539 ($511)

@OPTIMUM CHOICE INC.**

Coverage .. .. HMO .. .. .. .. PPO .. .. .. .. POS .. .. .. Indemnity

Individual .. $163 .. .. .. .. -- .. .. .. .. -- .. .. .. .. .. --

Family .. .. .$494 .. .. .. .. -- .. .. .. .. -- .. .. .. .. .. --

PRUDENTIAL HEALTHCARE PLAN**

Coverage .. ..HMO .. .. .. .. PPO .. .. .. .. POS .. .. .. ..Indemnity

Individual .. $129 ($123) .. ..-- .. .. .. .. $147 ($142) .. .. .. --

Family .. .. .$377 ($362) .. .. -- .. .. .. ..$433 ($415) .. .. .. --

U.S. HEALTHCARE**

Coverage .. .. HMO .. .. .. ..PPO .. .. .. .. POS .. .. .. .. Indemnity

Individual .. $145 .. .. .. .. -- .. .. .. .. -- .. .. .. .. .. .. --

Family .. .. .$424 .. .. .. .. -- .. .. .. .. -- .. .. .. .. .. .. --

*Rates for point of service plan to be released July 15.

**Rates estimated by brokers.

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