Health insurance companies in Md. announce rate cuts
Bipartisan emergency legislation successfully stabilized state marketplace
Efforts by state legislators of both parties and Gov. Larry Hogan (R) to stabilize Maryland’s individual health insurance market paid off last week when CareFirst and Kaiser Permanente both announced annual rate decreases for individual health plans beginning in Januar y.
Had emergency legislation not been passed during this year’s General Assembly
session, rates for some people would have nearly doubled and spiraling costs might have forced both companies to withdraw entirely from the state’s individual health insurance exchange.
“For the first time since the Affordable Care Act went into effect, all individual insurance rates in Maryland will go down instead of up,” Hogan said in a press release announcing the rate reductions.
Maryland Insurance Administration Commissioner Al Redmer Jr. announced that the new individual rates that have been approved for 2019 represent a 7.4 percent decrease for Kaiser’s Health Maintenance Organization plans, an 11.1 percent decrease for CareFirst’s two Preferred Provider Organization plans and a 17 percent decrease for CareFirst’s HMO plan.
Had the reinsurance program not passed, Kaiser’s HMO plan, which has nearly 70,000 members across the state and serves northern Charles and Calvert Counties, would have seen rates go up an average of 37.4 percent next year.
Rates for CareFirst’s HMO plan would have gone up an average 18.5 percent, and their two PPO plans would have skyrocketed by an average of 91.4 percent. CareFirst serves all of Calvert, Charles and St. Mar y’s counties.
The emergency legislation redirected federal funds that the state receives through a program called the State Innovation Waiver to help reduce the financial risk to health insurance providers that participate in the state’s health benefits exchange.
Commonly referred to as a Section 1332 waiver in reference to the clause in the Affordable Care Act that established it, the program awards funding to states as a reward for keeping health care costs down without compromising the quality and breadth of patient care.
Sen. Thomas M. “Mac” Middleton (D-Charles) championed the Senate bill that proposed redirecting the federal funds, which Hogan signed into law in early April.
The Centers for Medicare and Medicaid Services approved Maryland’s application for the Section 1332 waiver in August. The Maryland Insurance Agency then had to review and approve CareFirst’s and Kaiser’s proposed new reduced rates before an announcement could be made.
Health insurance rates rose statewide in January as a result of a decision last November by the Trump Administration to eliminate federal funding for cost-sharing reductions that people could use to help offset their health insurance costs.
In Maryland, the elimination of the federal funding drove increases of 58.2 and 76 percent for CareFirst’s HMO and PPO plans, respectively, and 43.4 percent for Kaiser’s HMO plans for this year.
The impact of the rate decreases could be significant for many Southern Maryland residents, said Todd Switzer, the Maryland Insurance Agency’s chief actuar y.
“If ever there were a time for Southern Marylanders to consider becoming insured and to shop carefully, 2019 is the year,” Switzer told the Maryland Independent.
According to Switzer, monthly subsidies in the form of advance premium tax credits, or APTCs, will be higher for many St. Mary’s County residents as well as for many people in parts of Calvert and Charles counties not near the Prince George’s County border, because CareFirst is the only provider in those areas.
Switzer said that the average 40-year-old who earns between 100—150 percent of the federal poverty level living in those areas could receive subsidies of up to $630.
“In many cases, this will mean that coverage can be obtained for ‘free’ since the subsidy exceeds the premium,” Switzer said.
For those parts of Calvert and Charles Counties served by both Kaiser and CareFirst, the APTC subsidy will be less, at $356 for the same hypothetical customer, but still enough to significantly reduce their premiums.
Switzer noted that just under 11,000 people in Southern Maryland do not have health insurance — 2,700 in Calvert, 4,800 in Charles and 3,400 in St. Mar y’s. More than half of them, Switzer said, are eligible for APTCs or Medicaid subsidies.
U.S. Sen. Chris Van Hollen (D-Md.) told the Maryland Independent that Maryland’s Congressional delegation had advocated for the approval of the waiver request.
“I am committed to making sure that families have access to quality, affordable health care,” Van Hollen said. “This legislation ... will lower premium costs for people across our state.”
Van Hollen pledged to continue advocating for improving the health care options available to Marylanders as well as “working to hold this Administration accountable for its efforts to undermine the Affordable Care Act.”
U.S. Rep. Steny Hoyer (D-Md., 5th) praised the work of state legislators and Hogan in working together to pursue “state-level solutions” to reduce the insurance premiums.
“However, consumers in Maryland would likely be paying even less for their coverage if it weren’t for the sabotage efforts of the Trump Administration and Congressional Republicans,” Hoyer told the Maryland Independent. “Congress ought to be doing more to stabilize insurance markets and expand access to coverage for Marylanders.”
Middleton said that the bipartisan effort to craft Senate and House of Delegates bills that would allocate the 1332 waiver funds to the reinsurance program was one of the most important pieces of legislation passed in this year’s session.
“It’s just great news for Marylanders,” Middleton said. “It’s a great example of how a political system should react.”
“If we hadn’t found the resources to keep the rates down, we were going to be left with a situation where Kaiser and CareFirst could have left the market altogether,” Middleton said.
Middleton explained that without the cost-sharing reductions, many people were forced to buy their health insurance outside of the exchange, reducing the size of the risk-sharing pool and driving rates up.
Another contributing factor to the potential rate increases was that most of the people who would remain on the exchange were from higher-risk populations who require more medical care and who often seek treatment in emergency rooms because they cannot afford to pay for doctor’s visits.
This in turn drives up hospital costs and increases ER wait times.
Middleton said that the herculean task of reducing rates to keep patients and ultimately the insurance providers themselves from leaving the marketplace still represented only the first step in stabilizing the Maryland Health Benefit Exchange.
The next step will be to increase the pool of healthy people who participate in the exchange. One of the options that legislators are looking at is bringing small-group health insurance plans, which businesses use to provide health insurance coverage to their employees, into the exchange.
For that to work, however, group and individual rates would have to be fairly comparable to prevent people from fleeing the small-group market in search of lower rates. Middleton said that economists have determined that the difference between the two types of markets has to be no more than 7 percent for the combination to be successful.
Middleton emphasized that the state legislature has no immediate plans to combine the two markets because a lot of work would need to be done first to identify and understand all of the potential impacts on policyholders and insurance companies.
“You’ve got to do this with extreme caution because you don’t want to drain the market,” Middleton said.
The hope is that as the insurance exchange grows and stabilizes, other health insurance providers will return to Maryland, offering even more competition that drives down premiums even further.
When the individual health insurance exchange launched in 2013, eight carriers offered qualified health and dental plans through it. Five years later, only Kaiser and CareFirst remain.
Middleton, who lost his reelection bid in the June Democratic primary, said that he expects the bipartisan momentum to stabilize the health benefit exchange will continue regardless of the outcome of November’s gubernatorial election.
“It would be bad politics to try to derail what’s going on,” Middleton said. “It’s going to take some very, very level-minded people, and we have them.”
Middleton said that it will require “a whole lot of creative thinking and hard work” to completely restore the health benefit exchange to a robust and stable, but that doing so is necessary because it will save lives.
“That’s the work that lies ahead for Maryland,” he said.