Health insurance plan has small businesses anxious WILL IT WORK?


A reform debuting in Maryland this week and intended to make health insurance more affordable to hundreds of thousands of people who work in small businesses could have the opposite effect.

Just days before it begins, only a handful of new benefits packages were on the market until last week, and businesses whose insurance policies run out July 1 found their choices severely limited. Prices for new policies are coming in higher than expected, and some of those who sell insurance worry that clients could drop coverage altogether.

Salespeople and businesses whose insurance policies expire Friday are awash in confusion.

The reform, which requires insurers to offer small groups a standard package of benefits at a uniform rate that can vary only based on age and location, was enacted by the General Assembly in 1993.

Advocates say that despite initial confusion, the reform will make insurance more accessible in the long run to the 650,000 Marylanders now without it.

The law stops insurers from setting rates pegged to medical conditions or refusing coverage for pre-existing medical problems and protects the consumer from large rate increases or loss of insurance when they change jobs.

But critics say prices are likely to rise for everybody, at least for the first year or two, and that could hurt businesses that employ between two and 50 people.

"It's hard to predict what is going to happen, except that some clients' prices increased. That's unfortunate. There are some unintended anomalies to come from it," said Ancelmo E. Lopes, vice president of Prudential Health Care Plan of the MidAtlantic, a leader in small group insurance, with 10,000 members.

"This is hard to read, hard to tell. We are concerned about what the end result is going to be . . . whether we will be priced well, I don't know. Is that business going to grow? I hope so," he said.

What appears certain is that it will be months -- or even years -- before the impact of the new law can be assessed and revamped if needed.

And as Congress and the nation debate national health reform, the Maryland experience indicates just how complicated it is to try to fix even a small part of the system:

* The reform is supposed to result in prices low enough to attract small businesses on a voluntary basis, but initial reports are that some new products cost more for some customers than what's available now. This is because insurance companies are guessing what their costs will be the first year and pricing high to protect themselves. When this happened in New York, tens of thousands of people dropped out of the insurance market.

* Many small businesses still aren't aware of the reform. A bigger potential snag is that businesses that employ more than 50 people are beginning to discover that they, too, are affected because of the law's wording.

* Residents of Carroll and Harford counties, where medical costs are more aligned with those in rural parts of the state, are lumped with the Baltimore metropolitan region and thus could experience double sticker shock.

(Maryland Insurance Commissioner Dwight K. Bartlett III said his agency reasoned that many residents work in Baltimore and use medical facilities there.)

* Because the plan is voluntary, some insurance brokers worry that it will prove attractive only to medically needy people who couldn't get insurance until now or who paid extraordinarily high rates.

That, in turn, would further drive up rates. "The hope is obviously that enough of the small employers will find the whole package attractive enough [that the cost of those coming into the pool will be spread across a large base and prices will drop]," said Mr. Bartlett.

"If, on the other hand, people decide this is not a good deal and employers opt in only if they know they have medical needs, it is going to be a problem," he said.

He said insurance regulators, too, can only guess what costs will be, and in approving first-year rates, are largely on the lookout for obviously outrageous calculations. Under the new law, companies must spend at least 75 percent of the premiums they collect on health care for subscribers.

Part of the confusion is a delay in approving policies and rates from about 50 insurance companies that proposed them. Insurers submitted them in May and regulators had only 60 days to approve them, leaving little time for the distribution system to translate them to customers that renew July 1. New policies from 14 insurers or their subsidiaries were out by late last week.

"Everybody is antsy now," said Stewart Lavelle, senior vice president and general manager of U.S. Healthcare. When similar reforms were introduced in New Jersey, he recalled, "there was a tremendous amount of communication problems."

In recent months, some insurance salespeople have advised healthy groups to renew before this week to lock in their current rates for a year.

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