In 1937, when Group Health Association opened its doors in Washington -- offering a new option for health care consumers called the health maintenance organization -- it competed with a small number of health insurance choices. There were fewer than six plans available, and more than 80 percent of the city's subscribers were pledged to Blue Cross.

Today, almost five decades later, the health insurance scene in Washington has exploded, producing a dizzying array of choices within an even more dizzying framework of health plan models. Selecting a health plan has become more challenging than filling out tax forms, and the potential importance of the choice -- the health care a family receives -- may well outweigh any other domestic economic decision.

What's happened to the health insurance industry in recent years, and why has Washington become a kind of laboratory city for both traditional and experimental plans?

The answer to this question lies, in part, in soaring health care costs.

Medical costs have risen an average of 15 percent a year in the 10 years up to 1983, according to the Bureau of Labor Statistics. The 7.4 percent rise in hospital room rates charted last year was the smallest annual gain since 1973. Fewer than 1 percent of all Americans could afford a lengthy hospital stay without insurance coverage.

More than 140 million Americans, or some 60 percent of the general population, the U.S. Census Bureau reports, are now covered by private health insurance. Ninety-six percent of workers in medium to large businesses have health insurance protection, according to the Health Insurance Association of America.

In Washington, the number of people covered by health insurance is astoundingly high -- nearly 90 percent -- a statistic reflecting the large proportion of government employes located here who are automatically entitled to health insurance protection.

In Boston, by contrast, only 69 percent of the people have health insurance.

As a result, health insurance companies, groups and associations have descended on the capital in unprecedented force.

The 1985 Washington Consumer Checkbook lists some 30 competing health insurance plans in the area, ranging from the venerable Group Health to the new independent practice association HealthPlus. Almost all of these plans offer low, standard and high option versions of care.

These plans fall into two distinct categories:

* Traditional compensation plans offer a variety of options and deductibles and allow the subscriber to pick the provider. There are almost two dozen of these plans. The three largest are: Blue Cross and Blue Shield, Aetna Standard and Mutual of Omaha.

The traditional plans attract some 80 percent of the health insurance dollars. Most insurance consumers remain attached to the central advantage of these plans -- the opportunity to select the doctor and hospital of their choice.

Prepaid plans charge a fixed fee to cover all medical services given by a selected group of providers. There are seven prepaid plans in Washington, which fall into one of three main structures: the "closed" health maintenance organization (HMO), the "open" individual practice association (IPA), and a sort of amalgam of the two, the Choice Plan.

HMOs -- such as Group Health or Kaiser-Permanente, formerly Kaiser-Georgetown Community Health Plan -- offer clinic-like settings and specific time allowances for visits. These plans also include a large number of para-professional staff help, physicians' assistants and nurse practitioners, who may field routine calls or visits. Some are open round-the-clock and have satellite clinics for geographic convenience.

Group Health remains the most popular of the HMOs in the area, reporting some 140,000 members early this year. Kaiser is nibbling on GHA's heels, however, with 130,000 members.

IPAs are intriguing newcomers to the Washington health insurance marketplace. The DC-IPA, a division of HealthPlus, opened its doors this past fall.

The IPA plan has been described as an HMO without walls. Basically, it is an association of private practitioners with an array of specialties who see patients in their private offices. The consumer can receive care from any of the doctors in the IPA. Subscribers are promised the personalized attention here sometimes thought to be absent from the clinic-like setups offered by larger groups.

Some physicians, of course, believe that not even the IPA model can be a perfect reduced rate alternative. One local internist, Dr. Daniel Ein, warned, "While it is true that prepaid plans provide lower cost medical care, physician providers have an incentive to find both less expensive and less personal ways of taking care of HMO or IPA patients." Doctors receive less compensation per office visit for these patients than for their privately insured patients.

While IPAs are not yet as popular as HMOs, they are competing vigorously for their market share. HealthPlus, the most recent contender, reported some 12,000 members earlier this year.

Halfway between the HMO and the IPA is an additional option: the Choice Health Care Plan. The Choice Plan is a variation on a theme refined on the West Coast and brought here by Aetna in the fall of 1983. Subscribers are offered treatment in a setting midway between the "closed" group Group Health model and the "open" IPA mode. Aetna contracts with a group of primary care physicians who see patients in private offices. If, however, a patient needs to be hospitalized or receive emergency care, he must usually go to a Choice Plan facility (in Washington, George Washington University Hospital) for treatment.

Competition among suppliers is fierce. To attract subscribers, insurers rely heavily on advertising and sophisticated marketing concepts.

HealthPlus, for instance, has offered free copies of a $30 American Medical Association medical guidebook to all new members and is currently offering reduced-fee memberships in local fitness centers for members. Group Health Association, which has launched a major television and radio advertising campaign, also provides a range of self-help courses to interested members, such as breast self-exam and basic cardiopulmonary resuscitation (CPR) skills.

Blue Cross and Blue Shield, another heavy television and radio advertiser during the weeks in which federal employes choose or change health plans each year, also has used full-page inserts in local newspapers and specially selected magazines to attract new members. The Mail Handlers' Benefit Plan even recently advertised on poster boards carried by city buses.

Insurance professionals around the country are watching the Washington marketplace with great interest. "Washington has attracted some of the best and most innovative health plans in the country," said Michele Metz, a marketing specialist for the Aetna Life Insurance Co.'s Choice Health Care plan. "The competition for the health care dollar here is sure to impact other markets around the country."

Sifting through the plans remains a complex task. Each of the 30 major plans in Washington has variables relating to catastrophic coverage, predictable major costs, controlling costs, deductibles, conversion privileges and, of course, individual versus family coverage.

Selecting a health plan remains a very personal decision. John Staelin, executive director of DC-IPA, said: "At each level of cost, there are degrees of constraint. Therefore, any decision on health plan subscriptions ought to take into account a variety of factors ranging from access and availability of care to treatment setting."

Dr. Robert Berenson, formerly an assistant director for health policy on President Carter's domestic policy staff and now a private practitioner and health policy consultant, agrees with Staelin.

"Unquestionably," Berenson said, "over the next decade, those not in HMOs or IPAs will be paying higher and higher premiums. This is true because the prepaid plans are efficient at targeting a relatively healthy subscriber population and at keeping overall costs down."

In the next 10 years, experts predict, Washington may well see erosion in the number of private practitioners as HMOs or IPAs slowly enroach on the traditional insurance plans. The broad array of choice that exists today may offer Washingtonians a unique opportunity to vote with their checkbooks.