Legislators hope that by reducing the risk to insurers selling on the individual market, premiums may come down enough to make them affordable next year. (Photo: Shutterstock)
Washington may not be willing to do anything to stabilize the individual markets under the Affordable Care Act, but Maryland is. In fact, it's been operating under the radar for months to do just that.
A report in the Baltimore Sun says that the state's Republican governor and Democratic lawmakers agreed not only to work quietly to come up with a plan to stabilize the state's individual insurance marketplace but are on the verge of approving a plan that would impose a new, one-year state tax on insurance companies and then use that revenue to subsidize the most expensive health insurance claims from policies sold through the state's health benefit exchange.
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The plan has already passed the state's House and the governor, Larry Hogan, has promised to sign it. All it needs now is passage by the Assembly. Legislators hope that by reducing the risk to insurers selling on the individual market, premiums may come down enough to make them affordable next year.
Otherwise, their fear is that 150,000 state residents could possibly see the individual market in the state collapse, just before the November elections, making it impossible for them to get coverage—all thanks to soaring premiums.
"We have people paying more for their health insurance than they're paying for their mortgage for their house," Hogan is quoted saying in his first public comments about the reinsurance plan. "They're making choices between buying groceries and having health insurance. It shouldn't be that way."
While costs for employer-provided group plans have only risen by up to 3.3 percent a year in Maryland since 2014, according to the Maryland Health Benefit Exchange, it's a different story for coverage on the individual market, where the price tags have gone up by 10–50 percent each year.
The report cites the state's insurance commissioner, Al Redmer, saying that without state intervention, health insurance premiums will rise by so much next year that only the state's sickest people would bother buying insurance that expensive. He adds that that could spur the only insurer still selling statewide policies on the exchange, CareFirst BlueCross BlueShield, to drop out of the market entirely.
"In my opinion, that would have been the impetus for the Affordable Care Act in Maryland to implode," Redmer says in the report, adding, "There would have been a significant domino effect in the state that would hurt thousands and thousands and thousands of consumers."
The single-year-fix is intended to help ward off premium increases projected to rise as much as 50 percent for the second year in a row. Actuaries say that the $380 million raised by the tax could cut that increase in half.
According to lawmakers, the proposal was politically feasible only because the federal tax overhaul included a tax cut for health insurers.
Health insurance companies had been paying a 2.75 percent tax to the federal government, state analysts said, but will not have to pay it next year under the new tax cut law—so Maryland policymakers are intending that companies pay that tax to the state instead under the state's new law. The report says that they also hope that the new $380 million fund will help them apply for a federal waiver that could lead to a large federal grant to help drive down premiums even further in the future.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
