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Maryland receives approval for reinsurance program

(The Daily Record / Maximilian Franz)

Middleton (The Daily Record / Maximilian Franz)

The federal government has approved Maryland’s application to set up a reinsurance program aimed at reducing the cost of health insurance on the individual market, state Sen. Thomas M. “Mac” Middleton said.

Maryland Gov. Larry Hogan will likely announce the approval at the Maryland State House Wednesday afternoon. Middleton was invited to the announcement but had a prior obligation.

“You’ll find that 200,000 people in the exchange are now going to realize stability or a decrease in their rates,” he said.

This year, the legislature passed a bill asking the state to apply for an innovation waiver, funded by a state tax assessment on insurance providers that would provide around $380 million next year.

In a reinsurance program, insurers can submit claims over a certain amount to a reinsurance pool, which will cover 80 percent of the claims. The state has not yet set that attachment point for the claims.

The state has put together the bare bones of the reinsurance policy, but the Maryland Health Benefit Exchange, the agency responsible for the waiver, will hold hearings through the rest of the year to set up the details of the program by the January, when the new plan year kicks in.

“Now you have to take the skeleton and put the flesh on the bones in terms of how this waiver works,” Middleton said.

Federal pass-through money accounting for the amount the government saves by not paying subsidies on the reduced premiums would then be provided to the state.

Insurers and state officials expect that the program will help reduce premiums by absorbing much of the costs of covering the sickest members, who are the most likely to purchase individual health insurance.

CareFirst BlueCross BlueShield, one of two insurers on the individual market in Maryland, believes its rate requests for the year could be lower than last year’s premiums, once reinsurance has been accounted for.

But Kaiser Permanente, the other carrier on the individual market, believes the Affordable Care Act’s risk adjustment program, which requires carriers that with healthier pools to pay carriers that take on a riskier pool of members, could interact poorly with the reinsurance program.

Before the reinsurance program’s approval, the two insurers had asked for an average 30 percent premium increase for 2019.

At a hearing last month, Maryland Insurance Commissioner Al Redmer said a hearing on new rate proposals could take place Sept. 17.

Reinsurance is considered a stabilization measure, meant to last only two to three years. The state’s new Health Insurance Coverage Protection Commission will consider more long-term measures to lower premiums on the individual market. Its first meeting will be next month.

The Baltimore Sun first reported that the waiver had been approved.

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