Md. consumers without subsidies left behind in ACA debate

Maryland Insurance Commissioner Al Redmer. (File)

Maryland’s uninsured rate under the Affordable Care Act has dropped to 6 percent, but people who make too much money for tax credits have found themselves on the outside.

Susan and Jeff Frangione lost well-paying jobs with good benefits during the recession.

Now, Susan Frangione, 58, works as the government/fleet specialist for a Montgomery County car dealership. She does not make as much money as she used to, but she gets health insurance.

Jeff Frangione, 60, is self-employed, working part time to try to supplement his income. But his wife’s health benefits do not extend to him, and he has to turn to the individual market for health insurance.

The problem for Frangione is that he does not qualify for tax credits because the couple’s combined income is too high. Last year, when he would have had to pay $500 a month for a bronze metal plan, Frangione finally dropped out of the insurance market.

Jeff Frangione is the 60-year-old consumer insurers want in the market. He has a clean bill of health and, without serious problems, would likely help insurers stabilize the risk pool.

But Frangione, and an estimated 174,000 people like him in Maryland, have chosen to go uninsured because it is too expensive and they do not get tax credits to help.

“If you have no subsidy, (premium payments are) a very substantial level of your income,” Chet Burrell, president and CEO of CareFirst BlueCross BlueShield told a House of Delegates committee Monday. “As the consequence of these premiums, we see enrollment declines on exchange of about 19 percent and off exchange of about 40 percent due to the unaffordability of the premiums.”

Most of these people are healthy. Without them, the state’s individual market could be on the verge of a death spiral, said Al Redmer, the Maryland Insurance Commissioner.

“In my opinion, if you don’t fix the short term, the program will not be around long enough for the long-term solution,” he said. “I believe that if we have another major premium increase of 40 or 50 percent that that will be the last straw and the Affordable Care Act will implode.”

With staggering rate increases last year — greater than 50 percent for some plans — the General Assembly has developed an urgency this year to do something to try to stabilize the individual market.

Rates remaining flat would be like hitting the jackpot, Redmer said.

“We are looking at a short-term solution to stop the bleeding,” he said. But if rates remain flat, “do we reasonably expect people are now all of a sudden going to show up and buy the same product at the same price that they elected not to buy this year?”

Keeping rate increases low would likely maintain the number of people currently in the market. But it will not do anything to bring people like Jeff Frangione back.

Reinsurance

With less than a month left in the legislative session, lawmakers have zeroed in on reinsurance as the most likely route to stabilizing the market.

With a reinsurance system in place, insurers would be reimbursed from a pool of money for health care costs above a certain amount.

In the long term, the state hopes to get a significant stream of federal funding for a reinsurance pool using a federal 1332 waiver.

But if the state cannot get a waiver in time for the next year, there are plans to institute a pool with only state funding. That pool would be funded by assessing insurers a one-time charge that normally would be assessed at the federal level, but they were given a reprieve from that payment federally for 2019.

How well funded these reinsurance pools are could have a significant impact on what rates insurers file for this spring. Insurers have indicated that without reinsurance they could ask to raise rates between 30 and 50 percent for next year.

It is believed within the industry that for every $100 million in a reinsurance pool, rates could drop by 7 to 8 percentage points. Legislators aim to fund the stopgap reinsurance fund by around $350 million to $400 million. That could drop rate proposals by 20 to 30 percentage points.

Individual mandate

The other significant legislation explored this session has been creating a Maryland version of the individual mandate.

In last year’s federal tax bill, Congress zeroed out the individual mandate penalty, essentially getting rid of the federal mandate.

Without the mandate, insurers warn that the risk pool could be further destabilized, driving rates higher. That is because without a mandate, they fear more young and healthy people may drop out of the market.

A proposed solution in Maryland would institute a state-level mandate, with the same requirements and penalty as the federal mandate, but it would convert the penalty into a “down payment” for insurance.

For the nearly 189,000 people uninsured people in the state who are under 400 percent of the federal poverty line and qualify for Medicaid or tax subsidies, the down payment could help them get health insurance at an affordable rate.

Advocates argue that incentivizing these people to enter the insurance pool could help bring down the rates for everybody. More people in the insurance pool spreads the risk around and reduces the overall impact of those sicker consumers with high medical expenses.

The goal would be to bring in more premium-paying people and reduce the number of people with high claims, re-balancing the market.

If that does not happen, that is when carriers increase rates, as they have done on the individual market since its creation. Burrell said CareFirst’s rates have increased 150 percent since 2014.

The individual mandate does not factor into the Frangiones’ decision.

“When I heard of Maryland’s plan to invoke a fine for those of us without health insurance I honestly, no lie, broke down in tears,” Susan Frangione said. “The down payment idea is fine if you really do qualify for a subsidy, are under 30 and single. Perhaps those $25 per month silver plans are a reality for those folks. But a $700 down payment on a $500 plus bronze plan does not increase the affordability for the rest of us.”

The proposals considered in the legislature this year are unlikely to make Jeff Frangione’s health plan any less expensive. It is more likely that bronze plans would see more limited increases than the increases seen over the past couple of years.

The Frangiones will play a waiting game, saving money and hoping Jeff can stay healthy until he is eligible for Medicare.

“We’ve almost completely cut red meat from our diets,” Susan Frangione said. “We use home remedies and I take one supplement, fish oil. And, we wait impatiently for the day he qualifies for Medicare.”