Bill would let Md. health exchange offer insurance subsidies

ANNAPOLIS — Providing state subsidies to some people who get their health insurance through Maryland’s individual market would make plans for most people more affordable and bring more uninsured people into the market, supporters of a bill to create those subsidies said Wednesday.

Legislation sponsored by Sen. Brian Feldman, D-Montgomery, would allow the Maryland Health Benefit Exchange to use funds raised through an existing tax assessment on health care carriers to pay for the subsidies.

The bill is a follow-on to legislation last year that created the assessment on health insurers to pay for the state’s reinsurance program, credited with driving insurance premiums down 22% on the individual market over the last two years.

“We’ve made some great strides in the past couple of years in reducing health care premiums,” he told the Senate Finance Committee Wednesday. “We can’t rest on our laurels. We still have 400,000 uninsured Marylanders.”

Creating a subsidy program would be a continuation of Maryland’s attempts to stabilize the individual market over the last couple of years. Before the reinsurance program was approved by the federal government in 2018, premiums had seen significant double-digit increases.

Subsidies targeted at certain segments of the population could help reduce overall premiums. The legislation, Senate Bill 124, does not require specific subsidies aimed at certain demographics. Instead, it authorizes the exchange to develop subsidies with the approval of its board.

One demographic likely to see subsidies are the state’s young adult population, typically between the ages of 18 and 34. These young people are valuable for health insurance risk pools because they are more likely to be healthy and less likely to submit high claims. 

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.

This is also one of the demographics with the most uninsured people. Young adults make up roughly half of the uninsured population that is not eligible for Medicaid.

The exchange has struggled to get this group to enroll in coverage. While it was successful in getting more people to enroll in coverage for 2020 — something only one-third of states did this year — it enrolled fewer young adults.

Both of the insurers on the individual market — CareFirst BlueCross BlueShield and Kaiser Permanente — support the idea of using subsidies to get more people to enroll.

The subsidies would be funded through the existing assessment on health insurance carriers in the state. The assessment was originally charged in 2019 at a 2.75% rate during a year when a similar tax was not charged at the federal level. That helped to pay for the reinsurance program.

This year it is charged 1% at the state level in addition to the federal tax. 

The state tax goes through 2023 in conjunction with the reinsurance program. The federal tax has been eliminated starting in 2021.

The National Federation of Independent Businesses Maryland Chapter opposes the legislation because it says that the tax unfairly increases premiums for most of the people and businesses who buy insurance outside of the individual market.

“Unfortunately, these victories will not be felt by the overwhelming majority of Marylanders who do not participate in the ACA’s individual marketplace,” the organization wrote in testimony to the committee. “For 2020 in particular, they will be double-taxed via the federal and state health insurer provider fee.”