Maryland is attempting to reinstate one of the most unpopular provisions of the Affordable Care Act (ACA): the individual mandate.
The federal Tax Cuts and Jobs Act, signed into law in December, repealed the Obamacare individual mandate, which financially penalized taxpayers who failed to secure health insurance coverage during the previous year. But that’s not stopping Maryland legislators, who have introduced companion bills that would force Maryland residents to maintain minimum essential coverage or face a penalty of 2.5 percent of the sum of the individuals’ modified adjusted gross income, or $695 per adult and $347.50 per child, whichever amount is greater.
Under the legislation, individuals would be required to identify on their taxes whether or not they have obtained coverage. If not, they will have the option to deposit their penalty payments into a state-administered down payment fund, which will be used to subsidize the taxpayers’ purchase of health insurance in the Maryland Health Benefit Exchange (MHBE).
Making people acquire insurance plans in the state’s individual exchange would ensure most people sign up for health insurance policies that meet the state’s minimum essential coverage standards. Maryland has extensive essential health benefitsmandates that go above and beyond the ACA’s required 10 health benefits. These mandates – coupled with other regulations, such as community rating and guaranteed issue – artificially increase premium costs and encourage higher deductibles in the individual market. A Heritage Foundation report published in 2010 estimates mandated benefits create a 27–30 percent increase in the individual health insurance marketplace, and community rating raises premiums by 26–45 percent for individuals under 34 years old.
Funneling people into MHBE may save it from collapse. Before the ACA went into effect in 2013, Maryland had eight insurers offering plans in the individual market. Now, the state is down to just two, and marketplace premiums are even higher this year, forcing additional people out of the market. Kaiser Family Foundation research shows a 40-year-old individual ineligible for a tax subsidy and enrolled in the lowest-cost Silver Plan in Maryland has faced higher monthly premiums. Costs over the past year have increased by 41–57 percent, depending on the enrollee’s county residence.
Understandably, younger and healthier individuals often choose to forgo pricey insurance policies that include comprehensive coverage, because it is typically cheaper for them to pay out-of-pocket the few times they actually utilize health care services. And, if a young, healthy person suddenly becomes extremely ill, he or she can always sign up for insurance regardless of his or her health status, because ACA’s pre-existing coverage provisions do not allow insurers to deny coverage because of pre-existing conditions.
In an attempt to stabilize the risk pool with low-cost enrollees, whose payments will primarily go toward paying the health care expenses of high-cost, sicker people, lawmakers in Maryland and nine other states – including California, Connecticut, and New Jersey – are advancing legislation to force healthier individuals to enter or stay in a state health insurance exchange.
This plan hasn’t worked on a national scale, and it’s unlikely to work in Maryland in the future. Instead of buying insurance they can’t afford, many people will simply move to another state or look for loopholes. Some may attempt to enroll in Medicaid instead.
If Maryland legislators want to increase the number of people who have health insurance in their state, they should promote policies that will help bring down skyrocketing health care costs and insurance premiums, not policies that attempt to force people to buy a product they don’t want and often can’t use.
Lawmakers could start by establishing state high-risk pools for uninsurable people, repealing costly mandated benefits, allowing insurance companies to underwrite plans, eliminating certificate-of-need laws, and adding health savings account options for state employees and Medicaid enrollees.