The Maryland Health Benefit Exchange has proposed providing more premium subsidies for young adults as a way of increasing stability and helping to control premium rates on the state’s individual market.
The proposal, for which there was no cost estimate available, would be the best way of building on the state’s success with its reinsurance program, said John-Pierre Cardenas, director of policy for the health exchange.
The proposal was one of the recommendations of the health exchange’s affordability work group. Cardenas presented those recommendations to the House Health and Government Operations Committee Tuesday.
Two years ago the legislature asked the health exchange to pursue a reinsurance program, where the state reimburses carriers for some high claims, as a way to address a rapidly destabilizing individual market.
Up to that point, the market was facing double-digit premium rate increases every year. Some observers said the market showed signs of entering a death spiral.
The reinsurance program, approved by the federal government, has helped reduce premiums an average 22% over the last two years.
The program was originally meant to be a stopgap solution while the state looked for a more permanent fix for the market, but it has become a more durable solution than anticipated.
Funded by a one-time assessment on insurers last year, the program cost 20% less this year than originally anticipated. The legislature extended the program’s funding this year by adding an annual 1% premium assessment for insurers, which is expected to generate $600 million over four years.
Rather than finding one grand solution, leaders hope that working around the margins can help eat into the remaining 6% of Marylanders not covered by health insurance.
“We have squeezed as much juice out of the reinsurance program as possible,” Cardenas told state lawmakers Tuesday.
The hope is that attracting more younger and healthier people will help stabilize the market further and keep premium increases low.
A law passed this year will allow the health exchange to use state tax filings to find people without health insurance. With a checkbox on tax forms, the uninsured can say they are interested in learning more about how they can enroll in insurance and what subsidies are available to them.
People without health insurance in Maryland are not a monolith, Cardenas said. They are young and old, sick and healthy.
But young adults make up a significant chunk of those people — 48% of the uninsured pool. Enticing these people, who tend to be healthier, would help keep the overall health insurance pool stable.
It would also be relatively cheaper to offer subsidies to members of this group because their premiums are generally lower by a 3-1 margin. A $50 a month subsidy would go a lot farther for a hypothetical 28-year-old paying $200 a month than for the 55-year-old paying $600 a month.
“The young adult subsidy would increase participation from young adults while improving the health of the risk pool,” Cardenas said. “You grow the market, you keep premiums down, increase the health of the risk pool and so the idea is that over time, reliance on reinsurance could taper down as the fundamentals of the marketplace improve, reducing long-term state resource investment while fomenting market stability.”
But that is as far as the work group’s recommendations go. The legislature would have to be responsible for coming up with the size of the subsidies and how to pay for it.