Maryland lawmakers on Wednesday finalized a bipartisan measure to collect $380 million in taxes from health insurers next year to help curtail surging premiums for 150,000 Marylanders and prevent the state’s Obamacare marketplace from a potential collapse.
Policymakers still need to address many complex issues to sustain Maryland’s expanded health care market beyond 2019. But analysts say the state took a novel approach by replacing a repealed federal tax with a new state levy.
“There’s a lot of questions ahead,” said Stan Dorn, senior fellow at the health care advocacy group Families USA. “The most important thing is Maryland policymakers stepped to the plate and decided to do what it took to protect their individual market.”
Critics say the health care system approved by President Barack Obama and the Democratic Congress in 2010 is broken, and coverage sold on the state’s exchange is too expensive for many middle class Marylanders. But policymakers on both sides of the issue agreed they needed to take action to keep Marylanders insured, especially during an election year.
The bill’s passage adds Maryland to the handful of states that have acted independently to buttress insurance markets that were unsettled when Congress failed to repeal the federal Affordable Care Act last year and could not agree on an alternative.
But Maryland’s solution is only temporary.
The legislation charges a commission with studying the long-term stability of the state’s insurance market and the possibility of requiring all Marylanders to buy health insurance as a way to replace the federal individual mandate that expires in 2019.
The legislation would create a 2.75 percent tax on the premiums that health insurers sell in Maryland next year. The levy is not new to insurers — they have paid it to help the federal government fund the Affordable Care Act. But in changes approved last year, Congress gave insurers a one-year reprieve from paying the tax.
Maryland health officials would invest the proceeds from the new state tax toward creating a state reinsurance program — a pot of money carriers can tap to help cover the most expensive claims from people insured on the state’s Obamacare marketplace. There was a federal reinsurance program to help insurers adjust to reforms under Obamacare, but it existed for only the first three years of the Affordable Care Act.
Under companion legislation that lawmakers have also approved, Maryland would seek federal money to supplement the new state tax revenue and stretch it to pay for more years of reinsurance.
Premiums on individual insurance policies, for people who don’t have coverage through a job or family member and are not poor enough to qualify for Medicaid or old enough to qualify for Medicare — have skyrocketed in recent years. Without action by policymakers, premiums were set to rise as much as 50 percent for a second year in a row.
The insurance market is in peril because insurers have underestimated the costs of claims they could face in recent years, and because not enough young, healthy people are buying policies to help subsidize the costs of older and less healthy people who require more care. Repeated attempts by congressional Republicans to dismantle Obamacare, along with the successful repeal of the individual mandate, have increased uncertainty for insurance companies, leading them to raise rates.
Actuaries estimate that the new state tax revenue and the proposed reinsurance program could cut expected premium increases in half.
“We support the bill because coverage is key to the transformation of care in Maryland that promises to get people the right care at the right time and in the right setting,” said Jim Reiter, a spokesman for the Maryland Hospitals Association.
CareFirst BlueCross BlueShield President and CEO Chet Burrell commended the legislature and Hogan “for working together to pass legislation that seeks to stabilize the individual insurance market in Maryland.”
“The Affordable Care Act — in large part — achieved its primary goal of making coverage available for individuals who might not have been able to secure it in the past,” Burrell said in a statement. “But the stability of the individual market in Maryland has been under severe pressure due to the older and sicker patients who have enrolled and premium rates that didn’t cover the cost of care.”
Burrell added that the reinsurance provisions should stabilize the market in the short term and make premiums more affordable.
The policy was a compromise between Democrats in the General Assembly and Republican leadership, led by the Hogan administration. Republican Senate Minority Leader J.B. Jennings said he didn’t enjoy voting for a new tax, but was compelled to ensure the individual insurance market didn’t collapse.
“The easy thing to do is vote no, and that’s the politically expedient thing that a lot of Republicans must do,” Jennings said. “This is where you’ve got to lead. We’ve got to do something and we’ve got to fix it.”
Six of the Senate’s 14 Republicans voted against the measure, as did all but three Republicans in the House of Delegates.
Del. Shane Pendergrass, who chairs the House Health and Government Operations Committee, said the lack of support from rank-and-file Republicans was frustrating, but he was relieved “we have a solution that can work.”
“Everyone is happy to help people,” Pendergrass said. “Not everyone is happy to find a way to find the money to help people.”
Maryland stands to become at least the fifth state to create its own reinsurance program and to seek federal money for it. The federal support comes out of the savings that smaller premium increases create for the government — money it would otherwise spend on subsidies for people who don’t qualify for Medicaid but still struggle to pay for Obamacare insurance policies.
Alaska created its program in 2016. Minnesota, Oklahoma and Oregon followed last year. Maine, Iowa and New Hampshire have explored similar options.
Maryland is the only state to find a solution from the hiatus on the federal insurer tax, according to Georgetown University research proferssor Justin Giovannelli, director of the Center on Health Insurance Reforms.
“It’s an interesting way to go about it,” Giovannelli said. “It puts on the table some significant dollars.”
After the legislative session ends next week, and as attention turns to longer-term solutions for the health insurance market, lawmakers predicted more tough debate ahead.
Jennings said the fix is “not going to be popular.” Without lawmakers in Washington fixing the problem, he said, there is no easy answer in Annapolis.
“We were dealt a mess by Congress,” he said.