Maryland’s mandate plan

Maryland has a really interesting plan to use a state based individual mandate and a kissing cousin of auto-enrollment to maintain their individual insurance markets. They call is the Downpayment Plan.

The plan starts in 2020. An individual mandate will be assessed. Individuals paying the mandate will be notified if they qualify for advanced premium tax credits (APTC). If the combination of APTC and individual mandate penalty makes the monthly net of subsidy premium be equal to zero, the person is auto-enrolled in a plan. If the cost of the least expensive premium is more than the APTC and individual mandate, the individual mandate collection is held in escrow for a year to help pay for insurance in the next open enrollment. If there is no active selection in that second open enrollment period, the held in escrow individual mandate payment is transferred to a state insurance stabilization fund where it is presumably used for reinsurance or subsidies for individuals who don’t qualify for federal APTC.

My first reaction to this is that it is nifty and creative. It also highlights the extreme option value of a state running their own exchange. I don’t know if Healthcare.gov could mechanically do what Maryland wants to do.

Secondly, the program will wildly vary across age and county. In Baltimore City, a 41 year old earning $30,000 a year qualifies for a $0 net of advanced premium tax credit and individual mandate Bronze plan. However in Alleghany County (Western Maryland) a 21 year old earning $30,000 qualifies for a Gold plan under this same scheme. The difference is due to regional Silver levels and Gold loading plan offerings. Baltimore has a pair of fairly inexpensive and tightly clustered Silver plans offered by Kaiser. Alleghany County has a cheap Silver HMO offered by CareFirst and then an ungodly expensive Silver PPO also offered by CareFirst that acts as the benchmark.

In this system, inherently lower premiums for the Silver benchmark is not necessarily a good thing. Very active plan management by the state in order to maximize the Silver on-Exchange benchmark while also minimizing on-Exchange Bronze premiums and off-Exchange Silver premiums would optimally be needed. A hyper narrow network provider that offers multiple low premium Silver plans dramatically reduces the number of people who can qualify for a zero-premium after APTC and individual mandate plans.

Overall, this is interesting and it can be replicated in other states that run their own marketplaces and are willing to actively manage plan offerings.

3 replies
  1. 1
    Yutsano says:

    When Washington State tried something like this way back in 1999 it was scrapped almost immediately because it proved too unpopular. Hopefully the idea of the mandate will make it work better now that there’s more experience with it.

  2. 2
    Spanky says:

    @Yutsano: More experience with it, and also well-publicized* consequences of scrapping it.

    Quick question for David: Has UPMC moved in to Western MD? Not that it’s a concern for me over here next to the Bay, just somewhat curious.

    As someone hoping to retire in a couple of years I’ve been running across a lot of “See which states are cheapest/best/most popular to retire in” articles and websites. None of them really get at a state’s political climate that allow this sort of thing, or anything else that will either help or impoverish their citizens. I could move to PA and pay cheaper taxes, but that “win” would immediately be negated by loss of so many other services.

  3. 3

    @Spanky: I’m not sure about where UPMC is going so I am not 100% sure to give you an answer to that question.

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