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Md. Slashes Drug Coverage for Small Businesses

By Kim Hart
Capital News Service
Tuesday, Nov. 22, 2005

BALTIMORE - About 450,000 Marylanders could lose prescription drug coverage due to a decision by state regulators to eliminate the requirement for drug coverage in health insurance policies offered by small employers.

The new plan, called PharmFlex, eliminates required coverage for brand name medications and increases the deductible employees must pay for generic drugs from $250 to $2,500 for an individual. Employees must also pay 75 percent of the generic drug price.

"We're trying to offer a core benefit that allows flexibility and some stability for the next five years so we don't have to keep revisiting it," said Rex W. Cowdry, executive director of the Maryland Health Care Commission.

The commission voted Tuesday to implement the new plan, which is expected to reduce insurance costs by more than 10 percent.

Under the plan, employers of up to 50 workers must continue to provide generic drug coverage if they offer health insurance at all, and regulators expect many of them will cover more than the minimum requirements. Currently, 90 percent of small employers who offer health insurance pay to provide additional coverage to reduce out-of-pocket expenses for their employees, said Stephen J. Salamon, who chairs the commission.

Salamon said the goal of the new plan is to give employers options while reducing insurance costs and possibly enticing more businesses to offer coverage for their workers. Currently less than half of the 110,000 small businesses in the state offer insurance, a 15 percent drop since 1999. Health insurance is optional for small businesses, and more than 59,000 employers do not offer health coverage at all.

"PharmFlex is a whole heck of a lot better than having no options at all," Salamon said.

The commission has been under legal pressure to make insurance policies more affordable. Under state law, the average cost of health coverage must be less than 10 percent of the state's average wage, or about $4,200. The current price of coverage is more than that, forcing the commission to adjust the standard benefit package.

Constance Row, the only commissioner to vote against the new plan, said "leaving employers with the option only to give employees high-cost pharmacy coverage could have adverse affects."

If employers do not opt to go beyond the minimum requirements, some workers could be left with substantial out-of-pocket expenses for prescription drugs, she said.

Other commissioners, including Andrew N. Pollack, expressed concern that the plan would not reduce costs enough to attract more insurance providers to the market, where only two carriers now provide 94 percent of the coverage to small businesses.

"Maybe it isn't significant enough," he said.

Small business owners and representatives have mixed reactions to the plan. Jeff Levin, general manager of the retail store Fields of Pikesville, said he agrees with deductible hikes, but that name brand drugs should still be included in the plans.

"In my experience, if it's not required, it isn't offered" to employees, he said. "Some drugs are only available in brand names, and that's a problem."

Jeffrie Zellmer, legislative director for the Maryland Retailers Association, said he supported the cuts to prescription drug coverage, and suggested that even more mandated services should be eliminated, such as some mental health services, in order to further reduce costs.

Ronald W. Wineholt, vice president of governmental affairs for the Maryland Chamber of Commerce, said the plan "is a step in the right direction."

"It's not likely that employers will stop providing drug coverage," he said. In terms of lowering costs, however, "it won't make a dramatic difference. ... At best it might help balance out the ongoing rise in health costs."

The new plan will go into effect July 1.

Copyright 2005 University of Maryland Philip Merrill College of Journalism

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