Md. lawmakers aim to grow funding for reinsurance program

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Sen. Brian J. Feldman, D-Montgomery and sponsor of a bill providing more funding for Maryland’s reinsurance program. (The Daily Record / Bryan P. Sears)

ANNAPOLIS — Maryland lawmakers want to extend a fee used last year to fund the reinsurance program that led to decreased rates on the individual health insurance market last year.

“Premiums are going to go back up through the roof, 50 percent to 60 percent,” said Sen. Brian Feldman, D-Montgomery and sponsor of a bill to extend the fee. “If we put everything off for another year, that could be a real problem. And once again, we are putting uncertainty into the future.”

But insurers are sharply divided over extending the fee. The two companies selling policies on the individual exchange say the fees are needed to stabilize the market, but other insurers say it will raise premiums unnecessarily on their customers.

Last year’s law assessed a 2.75 percent fee on health insurers, replacing a fee that would have been assessed federally this year but was set aside in the 2017 Tax Cuts and Jobs Act.

The fee provided about $365 million in funding for a reinsurance program that required a five-year federal waiver, but the proceeds from the assessment are only expected to last about two-and-a-half years. The federal waiver allowed for additional pass-through dollars from the federal government of about $373 million.

That was originally expected to be enough time for the state to work out a long-term fix to stabilize the individual insurance market, which was seeing annual double-digit premium increases while losing participants. But a commission set up by the legislature has not been able to agree on a long-term fix yet.

A bill before the Senate Finance Committee would allow Maryland to take advantage of the fee in any other years where the federal government does not assess it. With that funding, the state could get an additional $1 billion in federal pass-through funding over the life of the waiver, Feldman said.

Del. Joseline Peña-Melnyk, D-Anne Arundel and Prince George’s, is sponsoring the legislation in the House of Delegates.

A reinsurance program allows insurers to have some high member claims paid out of the reinsurance pool rather than from their own money, reducing the strain a small percentage of sicker members can have on the entire pool.

Before reinsurance was instituted, CareFirst BlueCross BlueShield and Kaiser Permanente, the two insurers on the individual market in Maryland, had asked for significant premium increases. After reinsurance, premiums were reduced by double digits.

Both CareFirst and Kaiser support the legislation to extend the fee, saying it buys Maryland more time to find a permanent fix for the individual market.

“Why leave money on the table? It doesn’t make sense,” Deborah R. Rivkin, CareFirst’s vice president for government affairs, told the committee. “We don’t know what will happen if we don’t get the funding.”

But opponents of the legislation worry that it will simply pass the costs of stabilizing the individual market off on consumers, not the insurance companies.

All health insurers in Maryland pay the assessment, not just the carriers on the individual market. Insurers pass off the cost of the fee to members through their premiums.

Insurers accepted the state charging the assessment for 2019 when it was just for one year and already was priced into their premiums. But they say future assessments would harm their members.

Actuarial consulting firm Oliver Wyman, in a report for UnitedHealth Group, estimated that the assessment raised the premiums of individuals in Maryland in the small group by $170 annually and in large group market by $190 annually. For families, those increases were $527 million on the small group market and $570 million on the large group market.

Those two markets cover three-to-four times the amount of people as the individual market does.

The bill would also assess carriers a 1 percent fee in years where the federal government does not set aside the fee.

Stabilizing the individual market on the backs of other Marylanders does not make sense, the legislation’s opponents said.

“There is enough funding in the reinsurance pool,” Tinna Quigley, representing the League of Life and Health Insurers of Maryland, told the committee. “We don’t believe that there is any urgency to pass any further assessments on health insurance carriers at this time.”

Charging the fee at different rates depending on what the federal government does would also add more instability for Maryland carriers, Quigley said, because it would create “an ever-changing business environment.”