New health insurance program for state workers expected to save $21 million

September 29, 1994|By John W. Frece | John W. Frece,Sun Staff Writer

Gov. William Donald Schaefer's decision last year to transfer responsibility for the state employee health insurance program from the personnel department to his budget department paid off yesterday.

Acting on budget department recommendations, Mr. Schaefer and the Board of Public Works approved new health insurance contracts for the state's 92,500 workers and retirees that are expected to:

* Save the state $21 million next year.

* Improve benefits for employees.

* Offer a greater selection of doctors.

* Keep premium costs in check.

The new contracts, which are valued over four years at $1.5 billion, will go into effect Jan. 1, 1995. Brochures explaining the new choices will be distributed to employees and retirees in late October, before "open enrollment" during November.

The contracts are for three different levels of service: a traditional see-the-doctor-of-your-choice plan, which is the most expensive; a health maintenance organization option, which is the least expensive because participants must see doctors within the HMO network; and a hybrid plan that encourages participants to stay within a network, but which permits them to see other doctors at a slightly higher cost.

To increase the selection of doctors available to workers under the traditional plan, the state was divided into four regions and bids were solicited separately for each region.

Blue Cross and Blue Shield of Maryland, which had been the sole provider of that program, won the contract for the populous Central Maryland region and for state retirees. But contracts for the three rural regions of the state -- the Eastern Shore, Southern Maryland and Western Maryland -- went to MD IPA, a Rockville-based HMO.

Employees in those three areas make up about 19 percent of the state workers who participate in the traditional program. If Blue Cross were to lose all that business, it could mean a drop in revenue of about $2.5 million next year.

But state and Blue Cross officials alike say insurance customers seem to be moving away from that sort of program and toward more managed care options, such as HMOs, which cost about half as much in premiums. What Blue Cross may lose in the traditional program, it hopes to recoup as employees migrate to its less expensive options.

"We are pleased with the way the contract has been structured," said Blue Cross spokesman Mike Streissguth. "We're pleased because our managed care products are offered in every region of the state. It is our goal to bring more of our subscribers into managed care."

The HMO contract went to seven firms, including Blue Cross and MD-IPA. The other winners include Chesapeake, GWU, Health Plus, Kaiser and Prudential.

The so-called "point of service" contract went to three firms: Blue Cross, MD-IPA and Health Plus.

It will not be known how many subscribers -- or how much of the $350 million a year spent on premiums -- each of the winning companies will receive until after the open enrollment period.

The cost for an employee to cover his or her family in the traditional plan has gone from $53.29 a month in 1993 to $101.76 this year, but would be held nearly steady at $102.23 under the new contract. By comparison, the cost for point of service coverage has gone from around $52 last year to between $55 and $60 next year, depending on which plan is picked.

Under the new contracts, HMO benefits will be uniform, making it easier for employees to compare.

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