Insurance companies that earn millions of dollars annually in hospital discounts because they promise to provide coverage to the sickest people will probably have to take on more such risk or lose the discount in June.
The Hospital Cost Review Commission decided yesterday to consider either imposing stiffer regulations or requesting a new law to force insurers to do more to earn the 4 percent discount. The reduction on hospital bills has been offered for 15 years to companies such as Blue Cross and Blue Shield of Maryland, who act as an insurer of last resort for people rejected by other carriers. These patients otherwise end up as charity cases on hospital accounts.
But the commission let stand existing discounts, worth more than $20 million last year, to Blue Cross and Blue Shield alone. Robert B. Murray, acting director of the commission, said options will be considered in a review process that starts today and could continue through the spring.
State regulators concluded in a December study that insurance companies may not be doing enough to warrant the discount. At the same time, regulations and past commission decisions make it difficult to take away the discount from Blue Cross or others, Mr. Murray said.
One option is to require companies that want the discount to offer the new Maryland standard health benefits package at a slightly higher price to people with existing medical needs, he said. The package, pegged at about $3,065, was developed to make insurance more affordable to small businesses.
Only a few companies qualify for the 4 percent discount on hospital bills. Besides Blue Cross of Maryland, which is the principal insurer of last resort, the others include health maintenance organizations owned by the Maryland Blue Cross plan, the Blue Cross plan covering Washington, and Prudential Health Plan of the Mid Atlantic.
The hospital regulatory body examined the discount after state insurance regulators discovered a discrepancy in figures reported by Blue Cross. The insurer told insurance regulators it was paying $2.4 million in hospital bills for hard-to-insure Marylanders while it told hospital cost regulators it was paying $26.8 million. At the same time, it was saving about $20 million through discounted bills.
The company said the $26.8 million included hospital bills for people enrolled in its group conversion plan, as well as for thousands of people who signed up for Blue Cross coverage in the 1940s and 1950s and later signed up for cheaper Blue Cross plans. The company opens its doors to all comers, regardless of medical history, during 15-day special enrollment periods twice a year.
The group conversion plan is offered to people who are insured fTC by Blue Cross at a group rate but who leave their job and otherwise would have to purchase more expensive individual policies.
The cost review commission in the past has allowed Blue Cross to count the group conversion plan and its individual medically underwritten insurance product when assessing whether it had earned the hospital discount. Blue Cross sells more than 50 percent of the individual policies available in the state.
The discount program has been in effect at least since 1978, but only a few hundred people have signed up in each of the 15-day enrollment periods offered each year.