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This story was updated Friday, March 12, 2010. A correction to this story was made Friday, March 19, 2010, which appears at the end of the story.

ANNAPOLIS — A measure to end CareFirst BlueCross BlueShield's practice known as "balance billing" would have devastating consequences for many small businesses in the state and result in more uninsured and underinsured Marylanders, say executives with the insurance provider.

Elizabeth Sammis, the interim state insurance commissioner, who spoke at a recent House Health and Government Operations hearing, said the bill would require insurance companies to pay for an out-of-network physician if the patient is being treated at an in-network hospital. CareFirst is the only insurance provider allowed to refuse to cover such payments.

Under balance billing, CareFirst pays the physician what it would pay an in-network provider, with the patient picking up the rest.

Often, the patient is surprised by the bill because the care was received at an in-network hospital, Sammis said.

"I'm ashamed to tell you my office approved this contract form," Sammis said of the CareFirst exemption. "That provision is not allowed in any other [insurance carrier's] contract."

CareFirst officials say out-of-network physicians often charge rates many times higher than in-network providers. Requiring the company to cover the entire charge would force it to raise rates significantly, they say.

CareFirst has had the "unfortunate task" of increasing premiums each quarter for the past 10 quarters, said Michael R. Merson, the company's chairman.

"As a nonprofit, we have no profit motive to raise the rates," Merson said. "If the premium goes up, it's because the costs go up."

But if the legislature adopts the ban on balance billing, CareFirst will have to pass costs on in the form of higher premiums to be paid either by employers or their employees, as a higher share of their deductible, Merson said.

"We'll end up with an underinsured or uninsured population," Merson said.

Several delegates asked whether the insurance commission has studied the impact of the proposed change on CareFirst or those it insures.

"This is something you can't study first, so there is some risk," Sammis said. However, "I'm not out to destroy CareFirst," she added.

Bill Simmons, president of Group Benefit Services of Hunt Valley, which administers insurance plans for businesses, said the state needs to be careful of how the change is going to hurt employers and workers.

"We hear more than ever that the insured can't afford insurance," Simmons said.

Donna S. Edwards, secretary-treasurer of the Maryland State and District of Columbia AFL-CIO, said the labor organization also opposes the bill, because it would mean higher insurance premiums for many workers.

On Friday afternoon, CareFirst released the following statement: "CareFirst BlueCross BlueShield plays no role whatsoever in balance billing. Balance billing is a practice through which doctors bill patients directly for charges not covered by insurance. Legislation under consideration in Annapolis would likely result in an increase in this consumer-unfriendly practice and lead to massive new health care costs for Marylanders."

Correction: This March 12 story incorrectly described "balance billing." Insurance company CareFirst sends insurance reimbursement directly to its insured members when they are treated by an out-of-network physician. "Balance billing" is the difference of what the physician seeks for reimbursement from the patient and what CareFirst is willing to reimburse. The assignment of benefits legislation would allow patients to have the insurance company send the reimbursement directly to the out-of-network physician.

The story also incorrectly reported the legislature would require insurance companies to pay out-of-network doctors. CareFirst already pays for out-of-network care by sending payments to the insured instead of the doctors, a practice that has been in CareFirst's contract since the 1970s, according to Acting Maryland Insurance Commissioner Elizabeth Sammis.

Finally, the story also incorrectly said the proposed legislation would ban balance billing. Instead, carriers would be prohibited from disallowing their members to have insurance payments made directly to their health care providers. Doctors who agree to accept the assignment of benefits would be paid up to 140 percent what the insurance carrier pays its in-network providers, in exchange for agreeing to not balance bill the patients.

An updated version of the story, "Patient billing legislation pits docs against CareFirst," can be found here.