WASHINGTON – Maryland officials fear that a White House proposal to let small businesses in different states pool resources and buy health insurance could ruin a decade-old state insurance program.
“This health care reform act has the power to destroy the good we’ve done since 1994 . . . we’re already there and we’ve been doing it for years” said Gerard Petrick, the chief of benefits and analysis for the Maryland Health Care Commission.
Petrick said Maryland’s plan, created in 1993, guarantees adequate health insurance to small businesses by mandating that insurers who provide small-group coverage make it available to any business. It also sets levels of benefits and caps premiums for the basic coverage at no more than 12 percent of the state’s average annual income — a limit that the state is approaching.
But officials at the National Federation of Independent Business said it is time for a change: Maryland’s current plan is too restrictive, mandates too many benefits and forces small business owners to choose between health coverage and solvency, they said.
“The small-group market in Maryland needs some serious reform,” said Ellen Valentino, the federation’s Maryland representative. “The small businessman is doing all he can to continue to offer health care insurance, the question is does the state offer him a choice.”
Valentino said small businesses need the flexibility their large counterparts possess, flexibility they can get through so-called association health plans, in which they pool money to increase their purchasing muscle.
“Association health plans are an excellent idea and offer small businesses the coverage of larger businesses,” Valentino said.
But Petrick said the major drawback of association health plans is that they do not come with the requirements of the current state system. That means an insurer could deny coverage to a business that it thought was high-risk, or provide coverage at significantly higher rates.
Premiums can vary due to business location, age and health status of employees and the type of provider network utilized.
“They (insurance companies) wouldn’t manage the risk, they would eliminate the risk,” Petrick said. “You don’t want employees letting their families go naked” as far as coverage is concerned.
He insisted that small businesses have flexibility under the current plan.
Petrick called the standard benefits package basic, but fairly comprehensive. But companies that want extra coverage can buy as much as they want through policy riders. On average, riders cost an extra $822 per employee annually and can make up about 13.7 percent of the cost of a plan, according to a report last year by the health care commission.
“You’ve got to look at the fact that people are buying up the plan and improving it. Our goal is to keep it basic,” Petrick said.
About 57 percent of Maryland small businesses offer health insurance, compared to 47 percent of small businesses nationally, according to an independent report done for the health care commission.
While small business owners complain the double-digit price increases are driving them out of business, Petrick said the commission’s study found that premiums in Maryland are rising at about the same rate as premiums nationally.
Premiums in Maryland for family coverage can range from over $2,000 a month to about $450 a month, according to the health care commission.
Valentino said that in some cases as much as 50 percent of an employer’s payroll can be dedicated to health insurance. In Maryland, about 19.7 percent of the average employee’s pay goes to health insurance, according to the independent report done for the commission.
Valentino said that with the rapidly changing economy and rising health care costs it is unacceptable that the Maryland program has not been updated since 1993, except to expand it in 1996 to let self-employed individuals purchase the plan.
The General Assembly is considering several proposals that would tinker with the current system, reducing the premium cap to 10 percent, requiring insurers to distinguish optional benefits from standard benefits and investigating the administrative costs associated with the sale of small-group insurance.
Petrick said that at the current rate of premium increases, the state could be at the current 12 percent cap by 2003 or 2004. Benefits will likely have to be cut to keep premiums under the cap — more so if lawmakers lower the cap this year — since it is unlikely the commission can raise co-payments or deductibles any further.
“It is going to be necessary to eliminate benefits to meet either the 12 percent or 10 percent cap,” Petrick said. “But for every area you suggest coming out, there are advocates who advocated for it coming in.”