Rates for fee-for-service health plans from Blue Cross Blue Shield of Maryland will rise Jan. 1, with small-group plans covering 50 or fewer people taking the biggest increase, an average of 14.5 percent.
The rate increases do not affect Marylanders covered by the Blues' health maintenance organizations, but will mean monthly increases for more than 230,000 Marylanders with individual health insurance, members of small groups or holders of Medigap policies. More than 1 million Marylanders are covered by an insurance or HMO plan administered or underwritten by the Blues.
People in fee-for-service plans are using more medical care, Blue Cross spokesman Jeff Valentine said, and drug and hospital costs are rising.
"It's a result of higher pharmaceutical costs, primarily, and higher hospital costs," Valentine said. "Our utilization experience has not been the same [for HMOs] as for indemnity plans. Because HMOs are a managed-care provider, we can manage the care more efficiently."
The biggest change will be an average 14.5 percent increase placed on small group insurance plans, said Charles LaMason, a spokesman for the Maryland Insurance Administration. Medigap policies will rise an average of about 8 percent, as will rates for most individual health insurance policies.
For almost every class of policy, Blue Cross had initially requested a bigger rate increase. On individual policies, Blue Cross sought increases of 14 to 25 percent, depending on the type of coverage. For Medigap policies, the requested increases averaged 16.2 percent, LaMason said.
Only on the small-group policies, which cover more than 100,000 Marylanders in fee-for-service arrangements or preferred-provider organizations, did Blue Cross get an increase large as it sought. But because of confidentiality laws, he said, the details of how much Blue Cross has been losing on
plans covering 50 people or fewer can't be disclosed.
"I can only tell you that according to the filing there were millions of dollars of losses" on small groups, LaMason said. "Whether to tell you how much is up to them."
Valentine said Blue Cross officials who could explain why the increase on the small-group rate was the largest were at a management retreat and unavailable for comment.
But in general, he said, the small-group plans have seen costs rise sharply because state law governing what the plans must offer mandates a broad package of benefits, the cost of which has been hard to control.
That assessment is basically true, associate insurance commissioner Randi Reichel said. A 1993 Maryland law ZTC mandates that small-group plans cover the same services as federally qualified HMO plans, but fee-for-service small-group plans don't give insurers as much right to control patients' access to specialized services as HMOs have.
"The benefits are mandated," Reichel said. "Everyone who sells small-group sells the same small-group, at least as a floor."
According to Insurance Administration figures, the increases mean that Medigap policyholders will pay $19.40 more monthly for Blue Cross' most expensive Medigap plan, and will pay more for all but one of the nine Medigap plans affected by the announcement. LaMason said 87,000 Maryland seniors are covered by an affected Medigap plan.
Individuals with a standard policy featuring a $100 deductible will pay an extra $14.28 a month. LaMason said those plans cover 42,000 contract holders and their dependents.
The administration did not release new prices for specific small-group policies, but said different Blue Cross small-group plans were granted increases ranging from 4.5 percent to 23.1 percent.
Blue Cross is not unique in finding itself squeezed between higher use of medical care and pressure not to raise prices; many publicly traded HMO companies have posted sharply lower earnings this year than last.
But in August, when Blue Cross released figures showing its second-quarter profit fell 59 percent, the company appeared to be leaning away from price increases as a solution.
"Raising rates is really an '80's reaction," Blues controller Gary Baker said. "Foremost is remaining competitive. So we are going to be looking at controlling costs first."
Pub Date: 12/03/96