Insurance law changes coverage

SUNDAY OUTLOOK

June 12, 1994

A year ago, Maryland passed a sweeping health insurance reform law intended to end different pricing for small businesses when employees had costly medical problems. The high prices kept an estimated 40 percent of Maryland's 45,000 small businesses from insuring their workers.

In the next few weeks, dozens of insurance companies will begin marketing a new standard package of health benefits to small groups -- those with two to 50 employees -- at a single price, regardless of their members' health. Prices can vary only on the basis of the number of people in a family, their age, and where they live. Employers can buy the new package, ask employees to pick up more of the cost, or cancel their insurance altogether. hTC Will the law, which takes effect July 1, have its intended effect? Will smallbusinesses buy the product?

Casper R. Taylor Jr.

Speaker of the Maryland House of Delegates,

Co-sponsor of health reform bill

We are now going to trigger the reforms in the small group market and that is going to take us a major step toward universal coverage in a certain segment of the market. It is also going to level the playing field as far as cost is concerned, and that is good news and bad news depending on who you are and the demographics of your group as it exists because, as it plays out, some groups will be winners and some will be losers.

We have a 12 percent cap there, which guards against excessive increases for anybody, and we also have rate bands, which narrow each year to further protect against too many peaks and valleys. Again, it is a meaningful step in a long march and I think it is going to produce dividends. But I also know other things have to happen as we go along. These reforms have to be broadened to the larger employer market.

Lynda Sussman

Co-owner, COB Inc. of Towson

Insurance broker

They haven't gotten the word out to the community, to small business owners, so of course there's delirium out there. And the other thing is, they have seen what is happening in other states.

With a few exceptions, rates are going to be very, very expensive. They [insurance company actuaries] don't know what they are going to get, and have to build it in. In New York, they publish the rates. They truly do community rate, so everybody with the plan has the same increase.

In Maryland, my concern is, what is a community rate? Define it. I have yet to hear a definition that makes any sense. They are not published. They are pulling them out of the socks somewhere. They don't understand the meaning of community rating.

Carlyle Montanye

President, Gettier-Montanye,

Distributor with 10 employees

We have had group health insurance for our employees for perhaps 50 years, and we won't know exactly how the new law affects us until our contract comes up for renewal at the end of this year.

But there are certain aspects of this law that I fully support, especially the portability and the ironing out of the pre-existing conditions issue so that health care doesn't have to be an issue when people are considering whether to change jobs. It should also be generally helpful to many small businesses, especially the ones that for whatever reason have been unable to provide coverage to their employees.

Most businesses want to provide some kind of coverage, and for many the issue is not cost but whether their employees can be covered at any price. This law should be a good first step toward getting coverage for a lot of people who have not been able to get it.

John Colmers

Executive director

Health Care Access and Cost Commission

I think it is going to take a much longer-term period to judge its effectiveness. It's unfair to look at the next few weeks to judge its success or failure for a variety of reasons. The first is that the reform goes into effect for contracts renewed after July 1, those effective in September, December, etc., so it will be a period of time before we know.

In addition, part of the difficulty in judging how well it is done, while the standard benefits package is a homogenous product that can be compared on price, the plans people are moving from are far from homogeneous. Therefore, it is difficult to tell whether the outcome is related to price or to the benefit plan itself [which may be more or less generous than the one previously offered].

That all said, the changes going into effect are changes that are well-needed in the small business insurance market.

One of the principal advantages of having the standard benefit plan, however, is that it does make the insurance market more easily understandable and price sensitive. In the past, it was difficult for businesses to compare on basis of price because insurance companies had all different options and extras.

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