Maryland reinsurance program helps lower 2019 individual premiums

Many Maryland consumers will pay lower premiums for individual insurance coverage next year, thanks to the state's new reinsurance program intended to help subsidize the care of high-cost patients.

Individual insurance rates for plans offered by Maryland's two insurers, CareFirst and Kaiser Foundation Health Plan, will decrease by 13.2% on average in 2019 compared with 2018. The insurers initially asked to hike rates by an average 30.2% back in May, before the CMS approved Maryland's request to establish a reinsurance program through a 1332 state innovation waiver last month.

Maryland joins several states that have implemented reinsurance programs to help stabilize their individual insurance markets in the face of rising premiums and shifting market rules. Six other states—Alaska, Maine, Minnesota, New Jersey, Oregon and Wisconsin—have received federal approval for a reinsurance program.

In a conference call with reporters on Friday, Maryland Insurance Commissioner Al Redmer said the objective of the reinsurance program is to "lessen the significant burden that many Marylanders are facing with significant insurance costs," but also to encourage consumers who had dropped their coverage to return to the marketplace.

State actuaries projected that 2019 enrollment would rise 5% because of rate decreases. More than 192,000 people are enrolled in individual coverage in Maryland.

Maryland finalized a 17% rate decrease for CareFirst Blue Cross and Blue Shield's HMO plan, which covers 109,000 members. The HMO plan's average monthly premium for a 40-year-old Baltimore nonsmoker enrolled in the lowest-cost silver plan would be $383 in 2019 before factoring in any subsidies. CareFirst had initially requested to increase rates by 18.5%.

Rates will decrease by 11.1% to an average monthly premium of $626 for CareFirst's two PPO plans, which cover about 13,000 members. Without the reinsurance program, premiums for CareFirst's PPO plans would have risen 91.4%, costing enrollees $1,444 per month.

Maryland approved an average 7.4% rate decrease for Kaiser's HMO coverage, in which nearly 70,000 members are enrolled, for an average monthly premium of $349. Kaiser first asked to raise rates by 37.4% before the reinsurance plan was instated.

CareFirst said the rate reductions are the first time in two decades the Blues plan will reduce rates for all Maryland consumers buying individual coverage.

"This development is historic,'' CareFirst President and CEO Brian Pieninck said in a statement. "This program helped to enable CareFirst to lower individual rates and take a step toward more affordable coverage for Marylanders."

CareFirst's former CEO Chet Burrell, who retired earlier this year, blamed past high rate increases on dwindling enrollment and sicker members in the individual market. In May, CareFirst said it expected to have lost about $476 million on individual plans in Maryland through 2018.

Reinsurance is just one way that states are working to prop up their insurance markets, as the zeroed-out individual insurance mandate and the expansion of skimpy short-term plans threatens to lead to higher rates and lower enrollment next year. Reinsurance works by helping insurers to cover medical claims above a certain amount. That reduces risk for insurers and allows them to keep premiums lower for consumers. The federal government also saves money through lower premium subsidies, but passes those savings to the state to help fund the reinsurance program.

Reinsurance programs differ by state, but in Maryland's case, insurers would be reimbursed for 80% of a plan member's claim above $20,000, with a maximum reimbursement of $250,000. The program is expected to cost $462 million in 2019. Federal funding and a 2.75% assessment on certain insurers will pay for the program.

Earlier this month, New Jersey Democratic Gov. Phil Murphy announced that individual insurance rates would decrease 9.3% on average for 2019, because of the state's recently approved reinsurance program and the creation of a state-based individual mandate. Insurers had initially asked to raise rates by 12.6%.

"Federal attacks on the Affordable Care Act and rising costs of healthcare have made premiums less affordable for residents buying plans on the individual market. We have taken deliberate actions to defend the gains made by the ACA and our work is demonstrating results," Murphy said in a statement on Sept. 7.