Two weeks after it began selling new health insurance coverage aimed at the small-business market, Blue Cross and Blue Shield of Maryland has slashed some prices up to 30 percent.
The insurer acted in response to pressure from brokers who compared prices and saw that the Blues were way out of line with others in the marketplace, said those in the industry. At least two other insurers have told state regulators they may file for rate reductions.
"There are other ones coming in. . . . It could be a feeding frenzy for market share," said Donald P. Brandenberg, chief actuary of the Maryland Insurance Administration, who approved the price cuts yesterday.
Blue Cross, the state's largest insurer, with about 1.4 million people insured, is locked in a battle to retain and increase its share of the market as new types of coverage and managed care take hold.
Blue Cross cut its rates on two of its three plans for the new standard package of health benefits all insurers are required to offer to groups of between two and 50 employees.
The health insurance reform law mandating the new benefit package, which took effect July 1, also requires insurers to accept all who apply regardless of their medical condition. It's intended to end the practice by some insurance companies of cherry-picking healthy groups and pricing others out of the market.
But some small employers, primarily those with healthy employees, found that their Blue Cross rates would increase by as much as 50 percent under the new small-business coverage. Some brokers found themselves telling long-time Blues customers to sit tight for better prices while others began finding their clients new insurers.
Blue Cross apparently feared a loss of existing business after seeing that its popular preferred provider organization plan, under which customers get a discount for using a Blue Cross network of doctors, was priced as much as 30 percent above the market. Its more traditional indemnity insurance was 20 percent higher, brokers said.
Blue Cross filed for permission to change its prices for these two plans a week after it began selling them. Prices for small-business coverage delivered through the Blues' health maintenance organizations were not affected.
"It's amazing," said William F. Simmons, president of Group Benefit Services Inc., a sales broker and claims processor for more than a half-dozen big insurers, including Blue Cross.
"I think what happened is that Blue Cross realized that their rates HTC were uncompetitive in the market place and reacted to that very quickly. I think, quite candidly, their rates now are a lot more fair."
Mr. Simmons and others said the reform has generated a lot more uncertainty within insurance companies about the level of medical risk they will assume by signing up groups without medical underwriting. As a result, the insurers built fat into their rates.
Normally, insurance companies wait six months or a year to revise rates and base it on their experience paying medical claims. In this instance, however, there is no experience for either the insurers or state regulators to go on -- all parties are guessing.
Blue Cross spokesman Michael Streissguth said that Blue Cross rates were high to start because it had interpreted deductibles under the standard benefit reform differently from other companies, lowering its estimate of how much individuals and families would pay in the out-of-pocket expenses.
In addition, the cost of medical care dropped in the months since the insurer first filed rates for small businesses and when it filed for the changes last Friday, Mr. Streissguth said.
Blue Cross declined to say how its small-business products are faring, but at least some competitors have seen business pick up significantly in recent days.
One, Employers Health Insurance, a Green Bay, Wis., specialist in small businesses, reported a three-fold increase in activity from Maryland brokers in the past two weeks. The insurer has responded to requests for quotes for 1,867 cases since the reform took effect, a company official said yesterday.