About 450,000 Marylanders could lose required insurance coverage of brand-name drugs when the Maryland Health Care Commission votes next week on a plan designed to make the state's standard benefits package more affordable for small employers.
The plan would still require insurance to pay for generic drugs, and employers could buy extra coverage for brand-name prescriptions. Most of the 50,000 small employers who buy the state-regulated policies buy extra coverage - for example, paying more to lower deductibles or co-payments - and regulators think many would continue brand-name coverage in some form.
Stephen J. Salamon, the commission's chairman, said insurers and employers would have wide latitude in fashioning coverage with different benefits and pricing for brand-name medications.
Salamon outlined the proposal, called PharmFlex, yesterday at a conference on overhauling health insurance markets sponsored by Maryland Business for Responsive Government, a market-oriented public policy group. He said it could reduce premiums 9 percent to 11 percent and open the market to innovative prescription options. If approved next week, it would go into effect in July.
He said the changes, along with others the commission is studying, could increase competition and affordability, leading more small employers to offer health insurance to their workers.
Though Salamon's proposal is focused in scope and teed up for action in the next week, most of yesterday's conference discussed broader reforms, generally directed at giving consumers more choices, that will be debated in the General Assembly next year and perhaps beyond.
State Sen. E.J. Pipkin, an Eastern Shore Republican, floated a reform plan that would end small employers' purchasing of health insurance with standard benefits. Instead, workers would select their own policies from a variety offered through a "Maryland Health Insurance Exchange," with employers subsidizing the cost if they chose.
Pipkin's plan would also drop state regulation of hospital rates and end the requirement for a state-issued "certificate of need" to offer certain health services.
The PharmFlex plan is a response to a requirement in state law that the health care commission, which sets the standard benefit package for small-employer policies, keep the cost affordable.
Over the limit
The law defines affordable as averaging less than 10 percent of the state's average wage. With a mix of individual and family coverage, the policies, on average, cost $4,335 - $77 over the limit - forcing the commission to take some action.
Businesses with 50 or fewer workers have to offer the standard benefit package if they provide group health insurance at all. But employers have said the standard package is unaffordable, and the commission estimates that just 42 percent of small employers offer the coverage.
Each year, the commission struggles with the tension of offering a comprehensive package of benefits - consumer groups often call for more benefits - while keeping premiums manageable. In the late 1990s, 60,000 employers bought coverage for nearly 500,000 workers, but the numbers have dropped since.
At its September meeting, the commission's staff presented three cost-cutting alternatives, all of which would have ended required prescription coverage altogether. After a series of town meetings around the state, the staff drafted PharmFlex instead.
The first public reaction to PharmFlex came at yesterday's conference from Ellen Valentino, state director for the National Federation of Independent Business, a small-business trade group. Valentino called it a "bold and necessary step." She said, "Some insurance is better than no insurance," and that more employers could buy coverage if the state didn't require the full benefit package.
Salamon said the commission would also be considering further changes to small-employer coverage, including the way high-cost patients are managed and allowing insurers to vary rates according to individuals' health status. Currently, rates are based only on age and geography.
Such changes would require legislative action, Salamon said, but the commission has the authority to approve PharmFlex.
Also, he said, the commission has the power to enact, and will consider, a high-deductible HMO plan that would enable members to maintain tax-sheltered health savings accounts to help meet health costs. Federal rules require high-deductible policies to qualify for the tax-favored accounts. The state already offers a high-deductible preferred-provider (PPO) plan.
Public meeting on insurance changes
The Maryland Health Care Commission will conduct a town meeting to hear public comment on the proposal to modify the rules for small-employer health insurance by requiring coverage only for generic drugs. The commission is scheduled to vote on the plan at its meeting the next day.
When: Monday 11 a.m. to 1 p.m.
Where: Commission offices, 4160 Patterson Ave., Baltimore.