The House Environmental Matters Committee approved a rewritten bill yesterday designed to preserve a hospital discount critics have called a "windfall" for CareFirst BlueCross BlueShield, the state's largest insurer.
The bill also would require insurers entitled to the discount to offer prescription drug insurance for seniors in rural counties, where Medicare HMO coverage has been ended.
Rural legislators said the bill, worked out with lobbyists for CareFirst, would help elderly residents. "It doesn't take them back to where they were under the Medicare program, but it does take care of one of their concerns -- prescription drugs," said Del. Ron Guns, the committee chairman and a Cecil County Democrat.
Under the bill, eligible residents in the rural counties would receive up to $1,000 a year to help pay for their drugs. However, they would have to pay $480 a year in premiums, as well as co-payments of $10 to $35 per prescription.
The estimated $5.4 million annual cost of the prescription program would be covered by the insurers who get the discount, with $4.4 million coming from CareFirst. The program would last two years, and the discounts, which total about $40 million a year, would be locked in for that period.
"I think it's good public policy," said Steven B. Larsen, state insurance commissioner. "It's currently recognized that carriers getting the discount may not be fully providing all those benefits back to Maryland consumers."
But C. James Lowthers, a member of the Health Services Cost Review Commission, said the bill "in effect, would add a new tax" on workers and employers who use health plans that don't get the discount.
Thomas P. Barbera, president and chief executive officer of Mid Atlantic Medical Services Inc. (MAMSI), a Rockville insurer that participates in the discount program, said he was "disappointed in the process." With the last-minute rewrite, he said, "We were not told about the bill, and we were not given an opportunity to testify."
The bill attempts to package solutions to two knotty public policy problems:
About 14,000 seniors in Western Maryland, Southern Maryland and the Eastern Shore lost prescription coverage this year after CareFirst, projecting a loss on the coverage, became the last insurer to withdraw Medicare HMO policies in rural counties. The HMO benefits included some prescription drugs, which are not covered by traditional Medicare.
Regulators have been concerned for several years over the 4 percent discount on hospital rates given to any insurers that offer "open enrollment" policies. That discount is designed to encourage companies to offer affordable plans to cover people who would otherwise be uninsured.
A state task force concluded in December that the discount was too high, and recommended cutting it in half. Legislators put in two bills to slash the discount -- one by half, the other completely. Del. Michael E. Busch, chairman of the House Economic Matters Committee, said the drug plan is "a good trade-off" for CareFirst.
CareFirst, which at $32.5 million got the lion's share of the discounts last year, disputes the conclusion that the discount is too high. Spokesman Jeffery W. Valentine said CareFirst subsidizes not just 4,000 open-enrollment members but also about 100,000 other policies for people who might otherwise be uninsured. The discount helps keep premiums low for all CareFirst members. "Our premium payers get it -- we don't pocket it," he said.
Barbera, however, said even if the discount had been cut in half, "that would leave us with sufficient incentive to stay in the program."