When UnitedHealthcare (NYSE:UNH - News) told American Printing House for the Blind that its health insurance bill would jump 49.9% in 2008, Chief Financial Officer William G. Beavin decided to shop around. He settled on Humana (NYSE:HUM - News), which offered a less generous plan that delivered a 17% rise. That's steep, and will cost the Louisville-based publisher, which has 310 employees, about $1 million a year, but it's manageable. "It's nice to know you've got health-care organizations that are willing to work with you," says Beavin. "It's not a take-it-or-leave-it situation."

Health insurance has always been pricey for small and midsize businesses. But after years of extracting hefty increases from smaller corporate customers, some insurers are showing more flexibility. Why? With the overall market for health insurance flat, carriers are battling to steal market share from one another. "There's a price war going on now," says Blaine Bos, a partner at consulting firm Mercer (NYSE:MMC - News).

Some players have targeted UnitedHealth Group (NYSE:UNH - News), the second-largest U.S. insurer, which has been hit by negative publicity from a stock options backdating scandal involving former Chief Executive William W. McGuire. UnitedHealth expects to lose more than 500,000 customers out of 26 million in the first quarter of 2008, partly due to a merger with PacifiCare (NYSE:UNH - News). The California-based small-biz insurer has been dogged by customer service problems. UnitedHealth is willing to negotiate -- it ultimately came close to matching Humana's offer to Beavin -- but it is reluctant to lower rates to defend market share. Says Kenneth A. Burdick, chief executive of the company's UnitedHealthcare unit: "We're in this for the long haul and not to get ourselves into some kind of short-term pricing approach."

Humana, Aetna (NYSE:AET - News), and Cigna (NYSE:CI - News) are in it for the long haul, too. They want to snare more of the so-called fully insured market, in which small and midsize companies buy group policies to cover employees. In contrast, big corporations typically insure themselves -- paying medical bills and assuming financial risk for coverage -- and hire insurance carriers to run their plans.

The fully insured market is far bigger and more lucrative, but going after it was less of a priority when the average annual growth in health-care premiums industrywide clocked in at 13.9% in 2003. Last year it was 6.1% -- the lowest since 1999.

Opportunity Knocking Insurers also aim to lure business away from local Blue Cross & Blue Shield plans. Right now, such plans dominate the fully insured market and some are demanding steep increases for coverage. Executives at Cigna and Humana say the "very competitive" conditions create opportunity. After years of serving primarily the big-company market, Cigna plans in 2008 to expand more into the individual and fully insured market. "We need to be price-competitive," says Jon Rubin, chief financial officer of Cigna HealthCare. "We're not the lowest in the market, but we're within the range of price competition."

Insurers could sure use the boost the new business would provide. Even the best-run carriers, such as the nation's biggest health insurer, WellPoint (NYSE:WLP - News), have seen their stocks pretty much flat since late 2005. The shares of UnitedHealth, where ousted CEO McGuire in December agreed to return some $600 million in compensation to settle civil and federal claims, trade at about 57. That's nearly 12% below late-2005 levels.

Weep not for the insurers, though. Premium growth still outpaces growth in workers' income and inflation. But at least small and midsize companies can now find carriers willing to fight for their business. "The competition is greater this year than last," says WellPoint commercial business unit chief Kenneth R. Goulet.

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