State to end 4% discount for insurers

Multimillion-dollar windfall reaped from open enrollment

`A grossly unfair system'

Intent was to reduce number of uninsured

Hopkins asks rate rise

Hospitals

May 06, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

State regulators voted yesterday to end a hospital rate discount for insurers who offer "open enrollment" health coverage. The discount has meant a windfall of tens of millions of dollars for the insurers, the commission's staff said.

Also yesterday, Johns Hopkins Hospital asked the regulators, the Health Services Cost Review Commission, for a 9.2 percent rate increase at a time other hospitals are having their rates cut.

The 4 percent discount for insurers who offer open enrollment policies is designed to reduce the number of uninsured in Maryland. However, the commission staff reported, the insurers covered only 4,630 Marylanders through the open enrollment policies and paid $4.9 million for their hospital care last year. At the same time, they reaped $40 million in discounts.

Open enrollment policies offer health coverage to individuals and families regardless of medical history.

One commission member, C. James Lowthers, called the discount "a grossly unfair system that should have been eliminated years ago."

On the staff's recommendation, the commission voted to continue the discount until December, giving the insurers time to develop alternative open enrollment policies or plan another way to cover current enrollees.

Also, a state task force studying nongroup health insurance issues is scheduled to report that month, so it could recommend a different way of providing coverage.

John A. Picciotto, executive vice president and general counsel for CareFirst BlueCross BlueShield, argued that the cost review commission should not take any action on the discount until the task force reports.

CareFirst enjoys $31.5 million in discounts in return for insuring about 4,000 Marylanders under the open enrollment program, called "substantial, available and affordable coverage," or SAAC. It paid $3.9 million in hospital claims for open enrollment members last year.

"I'm not here to say SAAC is perfect," Picciotto told the commission. After the meeting, he said he hoped, between now and December, to convince both the cost review commission and the new task force that "you can't just focus on the open enrollment program, but on the individual market as a whole."

Looking at CareFirst's 180,000 individual policies, he said, a discount of more than 4 percent would be justified. Others participating in the 25-year-old program are Prudential HealthCare, Optimum Choice and NYLCare.

Also at yesterday's commission meeting, Ronald R. Peterson, president of the Johns Hopkins Health System, said Hopkins needed "a significant adjustment to its revenue base" to cover $15 million a year in expected increased costs to operate a new cancer center and to set aside $25 million a year to build replacements for the children's center and critical care units.

He also said the formulas used by the commission do not fully reflect the cost of Hopkins' residency programs.

The Hopkins request triggers a full review of its rates by the commission staff. Such reviews are fairly rare; generally, after an initial full review, hospital rates are updated by formulas covering inflation and other factors.

Peterson said after the meeting that Hopkins had been considering requesting a full review anyway, but commission action to tighten the inflation-adjustment formulas clinched the decision. Simply using the formula, Peterson said, would mean a rate decrease of about 2.5 percent.

Generally, when the commission does a full review, it compares costs at the hospital it is studying with peer hospitals in Maryland. In its filing, Hopkins requested that the commission instead compare Hopkins with institutions as University of Michigan Medical Center, Duke University Hospital and Massachusetts General Hospital.

Robert Murray, executive director of the commission, said the staff would consider both in-state and out-of-state comparisons in conducting the review.

Pub Date: 5/06/99

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