Gov. Larry Hogan approved one reinsurance bill adopted by the legislature and a second reinsurance bill gained final passage Thursday, but these measures likely remain short-term solutions to the state’s individual health insurance market woes.
A reinsurance program will likely limit the significant premium increases Maryland has seen over the past couple of years, but more lasting change needs to happen at the federal level to really stabilize the market, said Al Redmer, the state’s insurance commissioner.
“I don’t believe that a long-term solution can come from the state level,” he said. “I think it’s critical that Congress put aside their partisan differences and fix this. For the state, any state, to try to fix it without given additional tools by the federal government is cost-prohibitive, in my opinion.”
A reinsurance program reimburses insurance providers for care that costs more than a certain amount.
The legislation Hogan signed Thursday allows the state to immediately begin pursuing a federal waiver to gain pass-through federal funding for a reinsurance program. The state’s health exchange and the Maryland Insurance Administration have already been in contact with the federal Departments of Treasury and Health and Human Services to make sure the state’s application will comply with requirements.
A 30-day public comment period required by the application process begins Friday.
The state hopes that the reinsurance pool can offset what could be some significant premium increase requests by insurers on the individual market for 2019. Hogan and Redmer said insurers warned them that premiums could increase 50 percent without any stabilizing legislation.
They believe that reinsurance will cause premiums to remain flat for 2019 or only increase slightly.
“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,” said Chet Burrell, president and CEO of CareFirst BlueCross BlueShield, one of two insurers participating in the individual market in Maryland. “The reinsurance provisions that have passed should – at least in the short term – help stabilize the market and make premiums more affordable. We will continue to work toward long-term solutions with elected officials, regulators and others.”
While Burrell and Redmer warn that the reinsurance solution will likely be a short-term fix for the next couple of years, some factors could determine how long that solution lasts.
Those include at what price point reinsurance kicks in, how well the reinsurance pool is funded and how much insurance companies are reimbursed out of the pool, said Dylan Roby, a professor at the University of Maryland’s School of Public Health.
“Whether it’s a long-term fix and actually stabilizes the market will depend on how much money the state saves and where they can put the attachment point and what (percent) of losses they can subsidize for plans,” he wrote in an email. “If it’s a sizable amount of risk they can remove from the shoulders of the plans, it could be quite successful.”
Those details will be determined by the board of the Maryland Health Benefit Exchange.
A second bill, which secured final passage in the legislature after Hogan’s bill signing Thursday, charges insurers a one-time fee in order to provide state funding for a reinsurance pool. That fee already exists federally but was set aside by Congress for 2019. It will provide an estimated $380 million.
Even if reinsurance is only a short-term solution to the individual market’s woes, it has bought the state time to consider long-term solutions.
Last year, legislation created the Health Insurance Coverage Protection Commission to look at solutions to stabilize the individual market. This year, the legislature forwarded different potential long-term plans to the commission for study during the interim.
“One important question for the legislature to grapple with is, if we in Maryland have a certain amount of money to invest, what’s the smartest way to invest that money?” said Stan Dorn, a senior fellow at health advocacy group Families USA.
One long-term solution expected to be explored by the commission would be an individual mandate with a down-payment system that attracted a high number of cosponsors in both the House and the Senate but has not been voted out of a committee in either chamber.