Md. reform may not end firms' insurance woes

April 25, 1993|By Kim Clark | Kim Clark,Staff Writer

After years of worrying about the hair stylists in her shop who couldn't afford health insurance on their own, Frani Hahn was delighted by Maryland's much-ballyhooed reform. The provision of the new law that caught her eye: requiring insurers to offer health insurance to small businesses like hers.

But when she discovered that the law set a target ceiling of about $260 a month per employee for the insurance, the #F gregarious owner of Puttin' on the Ritz turned serious and shook her head. Just last fall, she and the two uninsured people on her Towson staff of 12 rejected as too expensive a limited health plan at about half that cost.

Still, her employees desperately want coverage. "Sometimes they mention it to me," she said. "They say: 'I am so afraid if I get sick.' . . . It is really sad."

Sad. But surprisingly common.

As Ms. Hahn indicates, a key provision in Maryland's new health law -- one specifically drafted to help small businesses -- isn't likely to boost coverage for their employees and dependents, who make up as much as three-fourths of the 650,000 uninsured Marylanders.

Other provisions of the reform law, including one that forces insurers to give coverage to people with "pre-existing" health problems, are likely to improve access for everyone.

Still, the promise of low-cost insurance for small businesses "has been oversold as a solution," said Kara Ladenheim, senior research associate at the Intergovernmental Health Policy Project at George Washington University.

Other states that have required insurers to offer health plans to small businesses have seen only tiny increases in coverage, she said. That aspect of Maryland's plan, she added, "is a useful step. . . . But it is not a solution."

The reasoning behind that provision is clear.

About a third of all businesses with fewer than 50 employees -- the size eligible for the new health insurance package -- don't offer insurance, says the Employee Benefits Research Institute in Washington.

And with small businesses employing most Americans, people working for those businesses, and their dependents, account for as much as three-fourths of the nation's estimated 36 million uninsured, says Del. Casper R. Taylor Jr., an Allegany County Democrat who heads the House Economic Matters Committee.

Many small-business owners, like Ms. Hahn, complain that insurers often don't want to bother with small contracts. They also say that insurers quote prices as much as 40 percent higher for them, and that their premiums bounce wildly due to the illness of even a single employee.

So Maryland legislators drafted a provision that would require insurers to offer small employers a standard benefit plan by 1994. The specific benefits will be hammered out by a yet-to-be-named commission. But legislators said the plan should cost no more than 12 percent of the state's average wage.

That would limit premiums to about $260 a month. It may seem like a lot of money, but it's less than the $375 a typical Maryland business paid monthly for each employee's health insurance last year.

Providing access and a price cap was strongly supported by some small-business representatives.

"The response will be very good," predicted Jack Goeden, director of governmental relations for the Maryland chapter of the National Federation of Independent Businesses. "Most business owners want to provide health insurance. They will obtain it if they possibly can afford it."

But the record of a low-cost health insurance plan for uninsured Marylanders may hint at the limited impact of the new reform.

Last year, at the state's request, Blue Cross and Blue Shield of Maryland began offering a limited health

insurance plan for about 70 percent of the cost of a standard plan. The plan, offered only to uninsured people and not to businesses, pays 75 percent of most major medical costs and has a $250 deductible with a $50,000-a-year cap on payouts. It costs $66 to $156 a month, depending on the customer's age.

So far, only 300 Marylanders have signed up, says Marilyn Maultsby, Blue Cross vice president for governmental affairs. Although some Marylanders may have been lured to other Blue Cross plans, she concedes the expansion of coverage "is a drop in bucket."

And local businesspeople predict the response to the new business plan will be similarly lukewarm.

Some say they won't buy it because they can't afford another expense until the economy improves.

Carole Thomas, co-owner of Stars and Cracks Windshields, a repair shop, in Chase, had to drop health insurance for her and her family last year because business got so bad. Maybe, if she found a plan at $30, or even $40 a month, she could provide insurance for her one employee. But even that seems like a stretch right now.

"In bad times, some things have to go," she said.

Other small employers say they don't need to provide insurance -- most of their employees are covered by a spouse's plan, for example.

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