ANNAPOLIS – A bill allowing health insurance carriers to adjust rates for small businesses based on health status would drive rates down and convince more Marylanders to get health insurance, Maryland’s Insurance Commissioner told lawmakers Tuesday.
But the bill may leave thousands of older, less healthy small-business employees unable to afford insurance, said critics, including a key Maryland lawmaker.
Commissioner Alfred Redmer, speaking at a House Health and Government Operations Committee hearing, said if insurance carriers could add health status of policyholders as a rate-setting factor, more of them would do business in Maryland. This would increase competition and eventually decrease average rates, allowing many of the 740,000 uninsured Marylanders to get policies. Insurers already may use age and location to set rates.
“We don’t have competition that’s working well at all,” said Delegate A. Wade Kach, R-Baltimore County, who sponsored the bill. “That is the purpose behind this bill.
“Most people would like to have health insurance, and if it becomes affordable, I think they’d jump right on that bandwagon.”
Kach’s bill would check small-group market rates by imposing caps of 15 percent above rates used for larger groups for health status and geography and limiting annual premium increases at 25 percent of the previous rate.
Two carriers, UnitedHealth and CareFirst BlueCross BlueShield, handle 92 percent of small business policies in Maryland, which is one of just nine states prohibiting carriers from adjusting rates based on health status for state-regulated, small-group market policies.
Those factors, Redmer said, keep carriers out of Maryland. The state’s small-group policies are written by 15 companies, compared to 31 in West Virginia and 44 in Virginia.
One carrier, Milwaukee-based Assurant Health, guaranteed lawmakers that it would resume business in Maryland if the bill is passed, according to Scot Zajic, an Assurant lobbyist.
The bill would also assist small business owners, whose employees often cannot afford coverage, Redmer said. Many small businesses and their employees seek policies outside the small-group market because they are cheaper, driving up rates for everyone else in the program.
Many small business employees leave their jobs to work for larger employers who can provide cheaper coverage, said Jennifer Ostasewski, chief financial officer of CareSource LLC, a small Baltimore firm that provides supplemental medical staff.
The bill, Ostasewski said, would help her retain employees.
That’s because while rates may increase in the short-term, Kach said, competition, the bill’s rate caps, state laws and healthier employees’ subsidies will work to check rates for others in the long-term.
“We’ll cross our fingers on that,” said Delegate Robert Costa, R-Anne Arundel.
Critics, including Vice Chairman Peter Hammen, D-Baltimore County, questioned whether the bill would favor small firms with young, healthy employees.
“The losers (in this bill) are those with older employees,” Hammen predicted. “They’re going to pay more.”
Ernie Crofoot, one of two Maryland Health Care Commission members who voted against the bill (eight voted for it), agreed.
Crofoot said the bill would allow carriers to “pick out healthy people and the hell with the old and sick.”
Companies with healthier employees would benefit from lower rates, he said, but others would not be able to afford policies — increasing the number of uninsured Marylanders and further draining the state that supports them.
Redmer “want(s) to have competition regardless of what the consequences are to the public,” Crofoot said. “They’re going to hurt people that need insurance and it’s certainly not something that’s good for community.”
Redmer disagreed. The bill would encourage healthier Marylanders to get insurance and “improve the pool for everybody,” he said.
“Based on this bill nobody is going to be any worse,” he said. “There are not going to be any big losers.”