Virtually every health insurance company rejected Ethel Hunt after she had heart bypass surgery in 1987.
"Once you had any type of medical problem at all, they wouldn't touch you," recalled the 52-year-old Arnold businesswoman.
But that's no longer true for employees of small businesses. A year-old state law has reformed insurance industry practices, making it much easier and in many cases much cheaper for these workers to buy policies.
"For me it's been really great," said Mrs. Hunt, who runs an accounting and tax preparation firm with her husband. She has been able to buy a good policy for $198 a month, $100 less than she was paying for a bare-bones plan.
"I've got a million dollars worth of hospitalization" and a (x prescription plan that covers all but $15 of her $80-a-month prescription for cholesterol-lowering medication, she said.
Experiences like hers have washed away initial pessimism and uncertainty surrounding the law, which took effect last July and governs insurance policies for groups of up to 50 people.
"It's worked very well," said Miles Cole, director of business affairs of the Maryland Chamber of Commerce.
"For the majority of businesses in the small-group market, it has meant guaranteed access to health insurance products, generally at either lower or only marginally higher cost," said John Colmers, executive director of the state Health Care Access and Cost Commission.
The commission is still studying the impact of the law. By September it will have a sharper picture of how employers have responded and whether policies sold under the law are affordable for most workers. Employers are not required to pay for employees' health benefits.
Several insurance executives say that, based on their experience, the law has helped previously uninsured people obtain policies, a major goal of the legislation. But Mr. Colmers cautioned that the commission will not be able to measure any change in the state's uninsured population, which numbers 700,000 and includes many small-business workers. That would require a census, he said.
State legislators passed the law in response to a flood of complaints from frustrated small-business owners and their employees. Prices were skyrocketing, and many workers were excluded from coverage because of health problems.
Problems were much worse for small employers, who have less bargaining power and less ability to pay for health benefits than larger companies.
The insurance industry's behavior seemed odious to many people, but it was legal, until the General Assembly intervened.
Back to assuming risk
"The legislation set out to rewrite the ground rules of competition in this marketplace," said Mr. Colmers, "to make it more competitive and to return the business of insurance to the business of assuming risk rather than avoiding it. By and large, that has occurred."
Insurers no longer can refuse to cover people with health problems nor price policies on the basis of individuals' health histories. Now insurers set prices on the basis of the medical expenses of their total pool of subscribers, spreading around the risk and cost so that no worker has to pay exorbitant rates.
The law also requires insurance companies to offer the same comprehensive package of health benefits to all small businesses that want insurance.
Benefits include unlimited hospitalization, preventive services, medical equipment, rehabilitative care and prescriptions. Insurers offer these benefits through a health maintenance organization, which is the least expensive and most popular plan, and more expensive insurance policies requiring deductibles of up to $1,000 per family.
Requiring a standardized health policy has promoted competition by making it easier for employers to shop for the best price. Competition also has been enhanced by eliminating "pre-existing condition" contract clauses that allowed insurers to deny coverage to workers with known health problems.
Employers were often reluctant to switch insurers, even after a big price rise, because workers with health problems would be excluded by a new company.
Eliminating these barriers to competition has generated price-cutting among the more than 60 companies offering coverage to small businesses, according to several brokers.
Many get rate reductions
"I'd say the majority of clients have actually received rate reductions because of the reform," said Frank Kelly III, president of Kelly-Chick & Associates, a Hunt Valley broker and group insurance administrator.
Steve Salamon, a Pikesville broker, said 62 percent of his small-business clients are paying "comparable or lower premium rates."
Michael Fox, who owns Chesapeake Bay Outfitters in St. Michaels, said the law is saving him about $5,000 a year -- the difference between a policy that cost about $820 a month and one that now costs $430 to cover himself, his wife and their daughter.
And Lou Boulmetis, who with his wife runs Hippodrome Hatters on Eutaw Street in Baltimore, has saved $150 a month. He has new respect for the state legislature.
"This is a rare type of thing where a government meddles and it works out for everyone's benefit," he said.
Mr. Fox's and Mr. Boulmetis' experiences are especially interesting because both received rate decreases from the same insurance companies that covered them before the new law.
Blue Cross and Blue Shield of Maryland, Mr. Fox's company, cut its rates last fall to improve its competitiveness.
The market is "extremely price competitive," acknowledged James L. Hirsch, vice president of broker sales and administration at Blue Cross. But the company has been "very successful," he said, increasing growth by 15 percent in the past year.
Smaller insurers also can prosper in the new market. Chesapeake Health Plan reports it has added 5,000 business subscribers since last July.
As competition continues, price differences among insurers appear to be narrowing.
The latest rates published by the insurance commissioner, from January, show the price of a family policy varied from $373 to $456 a month among five leading HMOs.
The insurance industry appears to have benefited from the law, despite early fears that most insurers would find it impossible to compete under the new rules.
They're signing up clients who previously couldn't afford policies or were turned down because of health problems.
"It's interesting that [insurers] are benefiting from being able to insure people they couldn't or wouldn't" before the law, said Bill Simmons, president of Group Benefit Services Inc., brokers and administrators in Towson.
But Mr. Simmons said insurers that want to remain in the market must become more efficient and accept smaller profit margins in exchange for bigger volume. Mr. Kelly forecasts a shakeout in the industry.
"Only the best, most efficient and well-run companies will survive," he said. "I think [the legislation] has caused a lot of carriers to take a hard look at themselves and their staffing."
Some may be unhappy
Despite praise for the law, some people may be unhappy.
Risk-pooling required by the legislation means that businesses with young workers no longer can demand sharply lower rates than those paid by businesses with older workers, who tend to have more health problems. As a result, Mr. Colmers said, some younger employees may be paying more now than before.
Employees who had minimal insurance protection also may pay more because they're getting more: the standard benefit package is much richer than their previous policies.
But insurance brokers said few clients experienced increases.
The number of people covered by the law is increasing. Starting this month, insurers can offer part-time employees the same policies -- and protections from termination and denial -- offered to full-time workers. Self-employed individuals will come under the law next July.
Mr. Colmers' commission is considering some changes, such as modifications in the benefits package. Ethel Hunt would probably vote for the status quo. "It's great coverage," she said, "for someone who couldn't get anything."