Health insurance premiums on plans in Maryland’s individual insurance market decreased this year as a result of a reinsurance fund state lawmakers approved last year, but the fund only has enough money to last a few years.
To keep premiums down over the long term, state lawmakers who return to Annapolis next week are considering a new health insurance mandate and a fine for anyone who lacks insurance.
The proposal is similar to the federal Affordable Care Act’s “individual mandate” that Congress repealed late in 2017, but there’s a big difference: Maryland taxpayers would be able to treat the fine as a down payment on a health insurance plan.
“Under the Affordable Care Act and the way other states have done this, you just write a check to the government and don't get anything back,” said Stan Dorn, senior fellow and director of the National Center on Coverage Innovation at Families USA, a left-leaning advocacy organization. “In the Maryland approach, income tax filing becomes an opportunity for people to get insured.”
Dorn, the architect of the proposal, estimates that the fine combined with federal tax credits would cover the full cost of an insurance premium for about 79,000 Maryland residents. Another roughly 50,000 adults and children likely qualify for Medicaid and the Children’s Health Insurance Program but aren’t enrolled. The program would help identify them and get them coverage.
Getting these groups enrolled will strengthen the whole market, Dorn said.
“The group that gets signed up for coverage under this plan has a lot of young and healthy adults,” he said. “Once they get enrolled into the market, average risk levels go down and premiums go down.”
There’s still a group of people who don’t qualify for federal subsidies and would have to pay a fine. They can choose to spend more money on top of the penalty and buy insurance, but the authors of the bill aren’t counting on it.
The fines not spent on insurance are expected to yield about $30 million, said Montgomery County Sen. Brian Feldman, a Democrat and sponsor of the bill. After covering the program’s administrative costs, what’s left will go to a “rate stabilization fund.” Feldman said the Maryland Health Benefit Exchange would determine the best use for the money.
The bill comes out of a commission created in 2017 to protect health insurance coverage in Maryland. It was introduced last year but died in committee. Senate President Mike Miller said he expects it to have more success this year.
According to the Kaiser Family Foundation, 94 percent of Maryland residents have health insurance. Miller said the remaining 6 percent should have to buy insurance or pay a penalty.
“It’s mostly young people. It’s mostly millennials. They think they’re eight feet tall and bulletproof and nothing’s going to happen to them,” he said. “They should pay something so that they have some skin in the game and to make health care more affordable for all.”
But a Kaiser Family Foundation analysis of the 2017 National Health Interview Survey found that, among uninsured adults under age 64, only 2 percent said they don’t need health insurance. The largest group — 45 percent — said they lack insurance because it’s too expensive, and nearly a quarter cited a job change.
“The idea that we're going to penalize these people who can't afford the health insurance by making them pay a penalty because they can't afford to buy the insurance is crazy,” said Baltimore County Del. Chris West, a Republican who won election in November to the state Senate and sits on the commission behind the proposal.
West said he likes the idea of using tax filings as a way to find people who qualify for Medicaid but aren’t enrolled. As for the rest of the bill, he has an alternative suggestion.
“I think we ought to empower the comptroller's staff to take a look and then get back to people with a letter saying, in reviewing your tax return we noticed that you don't have health insurance now, but you qualify for a substantial subsidy, and if you wanted health insurance you could obtain it and it would either be totally cost free to you, or it would cost you only a modest amount of money,” he described.
But according to Christen Linke Young, a fellow at the Schaeffer Initiative for Health Policy, a joint project at the University of Southern California and the Brookings Institution, the penalty is what makes mandates like the one Maryland is considering effective.
“The economic literature suggests that the mandate itself is important,” she said. “Informing people is good, but actually imposing a consequence is an additional step that will encourage more people to enroll.”
She said timing is also a key part of why the proposal could be successful in getting people to enroll.
“They will have just paid — just faced with the prospect of paying a $700 tax penalty, and you sort of give them the opportunity to make a decision right then — don't pay this penalty. Instead go get health insurance,” she said.
Representatives of Maryland’s two main insurance carriers, Kaiser Permanente and Carefirst, declined to comment for this report. However, Carefirst CEO Brian Pieninck expressed support for an insurance mandate in an op-ed in The Baltimore Sun in November.
Feldman said he is optimistic about the legislation’s odds in the General Assembly.
“People didn't like Affordable Care Act/Obamacare because it was punitive. It was telling people you have to pay a penalty,” he said.
This proposal, he said, is about providing incentives.
“You’re taking the dollars and getting people health insurance,” he said. “That's really the goal here — is not to get their money and put it in the general fund of Maryland.”
But Republican Gov. Larry Hogan doesn’t appear to be on board. His spokeswoman declined to comment on the proposal, saying that Hogan will evaluate legislation if it reaches his desk. However, Hogan recently told The Washington Post that he opposes the bill.
He said it, “penalizes people to do something against their will.”