The cost of health insurance for small employers rose more than 10 percent in Maryland last year -- the largest increase since the state began regulating small-group policies in 1995, according to an annual study by the Maryland Health Care Commission.
To keep the policies affordable, regulators "may have to make hard tradeoffs between benefits and costs," John Colmers, executive director of the commission, said yesterday. Among other regulatory duties, the commission oversees small-group health insurance in the state.
If the cost of the policies threatens to exceed affordability guidelines, the commission can reduce the standard package of health benefits. Employers can offer extra benefits through riders on policies but cannot offer less than the standard package if they offer health insurance.
The affordability limit is 12 percent of the state's average wage -- a moving target that increases as wages do. From 1995 to 1998, the cost of health coverage hovered between 81 percent and 84 percent of the cap. But, with premium increases last year outpacing wage gains, the cost jumped to 88.2 percent of the cap.
The commission took actions last year aimed at holding down premiums. Those changes will go into effect July 1, including adoption of a "formulary," or a list of prescription drugs approved for coverage. Colmers said the commission will have to decide in the fall how to adjust benefits for the following year, and will be seeking input from employers, insurance brokers and others.
While the small-group policies were offered by more employers last year than before -- 58,495, up 34.2 percent since 1995 -- fewer people were covered. The plans enrolled 476,622 Marylanders (small employers' workers and their dependents), 2.6 percent less than in 1998.
Colmers said the decline in participation might reflect three factors -- statistical problems as merging HMOs combine their data systems; some employers' dropping coverage because of premium increases; and growth that made companies too big to continue in the program. (The state-regulated plans cover companies with two to 50 employees.)
The report also documents in Maryland a trend seen nationally, in which enrollment shifts from HMOs to plans that allow patients more flexibility. While HMO enrollment was down 11.9 percent, enrollment was steady in point-of-service plans (HMOs with a limited out-of-plan benefit), and up 6.7 percent in preferred provider organizations (PPOs), which allow patients to choose any participating doctor without approval from a "gatekeeper" physician.
Amid consumer demands for more flexibility, HMO premiums increased 13.5 percent, while point-of-service premiums went up 8.8 percent and PPO premiums 6.1 percent. Those plans cost more than HMOs, but the price difference was narrowed.