Two reports – one prepared for two Maryland insurance industry trade groups and the other for a general agency operating in the state – reach a similar conclusion: that the Maryland system for delivering health insurance works better than the Massachusetts health exchange.

The results of the separate reports may contribute to the ongoing state and national health care debate, as legislators in Maryland and Congress continue to explore whether to create health exchanges similar to the Massachusetts Connector, launched in 2007, to centralize the sale of insurance to individuals and small groups in the state.

Maryland’s existing system, which connects health insurance companies to consumers through general agencies and insurance brokers, “has evolved into a unique sales structure that centralizes administrative processes for small groups and achieves many of the functions of an exchange in the private market,” according to the report released by Avalere Health, a Washington, D.C.-based advisory services company. The study was funded by BenefitMall, a Dallas, Texas-based general agency and third-party administrator operating in Maryland.

The second report, prepared for the Maryland Association of Health Underwriters (MAHU) and the Maryland chapter of the National Association of Insurance and Financial Advisors (NAIFA), also argues against health exchanges. The report says Maryland’s private-sector system, the result of 1993 small-group insurance reform, is more efficient public-policy approach to marketing and selling health insurance in the state.

“With regard to the establishment of an insurance exchange, the capabilities of the intermediaries reviewed in this report revealed that Maryland is well-positioned to leverage the existing private sector infrastructure rather than expend scarce public resources to establish a new public entity to help organize and structure the market, enhance transparency, improve competition and subsidize the purchase of commercial [health] insurance,” the NAIFA-MAHU report said.

IFAwebnews.com obtained a copy of the report prepared by Jonathan Gruber, a member of the Massachusetts Connector board and an economics professor at the Massachusetts Institute of Technology, and Robert Carey, a health care consultant and former director of planning and development for the Massachusetts Connector.

Report took a ‘risk’

The NAIFA-MAHU report, which cost $50,000, will be used to lobby the Maryland General Assembly against creating a health exchange in the state to provide health insurance, according to Bryson Popham, a lobbyist for both groups. For several years, legislative proposals to create health insurance exchanges have been floated.

Bernard DiFiore

“We took a risk,” Popham said, explaining why the groups chose two experts in the Massachusetts’ system to compare it to Maryland’s delivery mechanism.

“We feel we have a product, and the associations have proven the point, that it works,” Popham said. “That is, the private sector, given the opportunity, can deliver insurance products and services more effectively and efficiently.”

The BenefitMall report is designed to discourage Congress and President Barack Obama from including health insurance exchanges in final health care reform legislation, said Bernard DiFiore, BenefitMall’s CEO. Obama and Democratic leaders continue to work to resolve differences between the House of Representatives’ bill and the Senate’s bill, both of which call for the use of exchanges to deliver insurance to consumers.

“Maryland’s model doesn’t exist anywhere else,” DiFiore said, noting that he became aware of the Maryland system when BenefitMall bought The Mather Cos. “The reason it’s so efficient is you don’t have one selling and one administering.”

Lack of duplication in Md. system

In Maryland, health carriers offer their plans through general agencies, also known as third-party administrators, who then work with insurance agents acting as brokers to market and sell those products to employers and individuals. That Maryland has four carriers proves it as a vibrant insurance market, unlike some states like Alabama that have one carrier with a near monopoly, DiFiore said.

The Maryland system, DiFiore said, avoid duplication between health plans and the TPAs or general agents, who can service both individuals and groups.

“Employers and brokers in Maryland have also come to rely on [general agents] that centralize administrative functions, such as maintaining the enrollment census and billing,” the BenefitMall report states. “Thus, Maryland’s small group market already operates with plan standardization and administrative simplification that are touted as two of the chief goals of insurance exchanges. Further, this structure services thousands of small businesses more efficiently than the newly created [small group plan] in Massachusetts.”

DiFiore said the study from BenefitMall, which operates in 11 states, including Maryland, is designed to help members of Congress to understand better what the Massachusetts system does and does not provide. For instance, the study points out that the Massachusetts’ system, enacted in 2006, works well in a climate with a public plan and a subsidized individual market.

When looking at small-group insurance sales, both reports favor the Maryland system.

The BenefitMall report, funded by the company, focused on its business, while the NAIFA-MAHU study focused on two of BenefitMall’s competitors, Group Benefit Services and Kelly and Associates Insurance Group. DiFiore said his company declined an offer to have the authors include BenefitMall in the NAIFA-MAHU analysis.

The NAIFA-MAHU report is scheduled for official release at a press conference at the Maryland Inn in Annapolis, Md., at 1 p.m. Feb. 3.