Maryland: Gov. signs bipartisan reinsurance bill, should cancel out 21% worth of rate hikes next year

Maryland Governor Larry Hogan signed a bipartisan bill on Thursday that state officials say will help keep healthcare premiums from spiking again next year.

The bill creates what’s known as a reinsurance program for the state’s health insurance marketplace, which was created as part of the Affordable Care Act.

...Without the fix or any action in Washington, Maryland officials predicted that healthcare premiums in 2019 could jump up to 50 percent, driving more of the 150,000 people to abandon the state’s marketplace — possibly leading to its collapse.

This is actually a bit misleading--It's true that there's around 150,000 people enrolled in ACA exchange policies in Maryland, but the vast majority of them are subsidized and therefore wouldn't be impacted by that massive rate hike (unless their carrier dropped out altogether, which is a possibility). HOWEVER, about 32,300 of them are unsubsidized, along with (according to the Maryland Insurance Dept.), another 93,000 people enrolled in ACA-compliant off-exchange individual policies. That's around 125,000 people who will be hit with the full rate hikes.

Four other states have reinsurance programs. Maryland’s reinsurance program will be paid for with $380 million worth of taxes levied on insurers; the companies do not have to pay roughly that same amount in federal taxes because of a one-year exemption written into the recent overhaul of the tax code.

How much does $380 million translate to? Maryland's average individual market premium this year is $629/month, and their total individual market is around 243,000 people. That's around $152,847,000 per month in 2018, or a little over $1.8 billion for the year. That $380 million will absorb about 21% of whatever next year's rate increases amount to.

Put another way, it should cancel out roughly $132/month in rate increases for the 125K unsubsidized enrollees, or around $200 million of the $380M total revenue. The remaining $180M would cut down on the unsubsidized premiums for the ~121K subsidized enrollees...which basically amounts to cancelling out most of the federal subsidies they receive (in other words, most subsidized enrollees wouldn't see their net premiums change one way or the other, which is to be expected).