A Health Plan ‘Down Payment’ Is One Way States Try Retooling Individual Mandate

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As President Donald Trump and congressional Republicans tirelessly try to dismantle the Affordable Care Act, a number of states are scrambling to enact laws that safeguard its central provisions.

The GOP tax plan approved by Congress in the last days of 2017 repealed the ACA penalty for people who fail to carry health insurance, a provision called the “individual mandate.” On Jan. 30, in Trump’s first State of the Union address, he claimed victory in killing off this part of the health law, saying Obamacare was effectively dead without it.

But before that federal action kicks in next year, some states are enacting measures to preserve the effects of the mandate by creating their own versions of it.

Maryland is on the cutting edge with legislation moving through both chambers of the Statehouse.

“We’ve been just struggling since Trump became president with how to protect the ACA in our state,” said Vincent DeMarco, president of the Maryland Citizens’ Health Initiative, a nonprofit organization that has been instrumental in pushing the measure.

Proposals have been discussed or advanced in at least nine states, including California, Washington and Connecticut, and the District of Columbia.

Creating an individual mandate is just one way that states — generally blue states where Democrats control the legislature — seek to ensure what many lawmakers view as key advances made by the ACA don’t disappear.

They’re looking to one another as test cases to see how state-level legislation can either buttress or alter the ACA, according to Trish Riley, the executive director of the National Academy for State Health Policy.

“One state will try one approach, others will try it,” Riley said. “It’s an experiment, and an important one.”

Time is short, since most states have limited legislative calendars and are fast approaching the deadlines for insurers to file their 2019 rate plans.

Passing and implementing these kinds of measures will be tough, said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute. But “I think there’s still a window of opportunity for states to do something and have an impact on 2019 premiums,” she said.

Maryland’s Take On The Individual Mandate

Maryland’s effort began last April when the state legislature created the Maryland Health Insurance Coverage Protection Commission “both in response to and in anticipation of efforts at the federal level to repeal and replace the ACA,” according to a report by the state’s legislative services department and the commission itself.

The commission, chartered for three years, is charged with studying how federal action could affect the state’s health insurance market and Medicaid program and offering recommendations to mitigate any negative impacts. The panel began meeting months before the Maryland General Assembly started its 90-day session in January.

Based on the commission’s initial recommendations, Sen. Brian Feldman and House Del. Joseline Peña-Melnyk introduced the Protect Maryland Health Care Act of 2018, which lays out a framework for preserving an individual mandate in the state.

The federal individual mandate was put in place to make sure that younger, healthier people joined the insurance risk pool, helping to stabilize the market. The idea is that those relatively healthy customers help cover the insurers’ costs for sicker customers’ care, which keeps premium costs manageable for everyone.

The Congressional Budget Office estimated that 13 million people nationwide would become uninsured without the individual mandate. Some will choose to go without insurance or will not be able to find an affordable plan. Insurers could opt to leave local markets because they could not make money covering only sick patients.

Feldman said insurers and health care experts testified before the commission that Maryland’s insurance exchange would collapse in 2019 if the state didn’t act.

“Because of uncertainty at the federal level, it’s going to be up to states in this arena to pick up the slack and to enact legislation that responds to that uncertainty,” he said.

The federal mandate imposed a tax penalty on people who could afford to but chose not to buy insurance, depositing the money in a general Treasury fund.

In Maryland, the penalty fee will effectively be used, according to advocates, as a “down payment” on an insurance policy.

Beginning in 2020, if someone indicates on their taxes that they’re uninsured, the state would use the fine, plus any tax credits from the federal government, to buy an insurance plan for them.

Maryland would match its residents only with plans that cost nothing more than the fine plus the federal subsidy. So, if such a plan isn’t available in a person’s area, the state will hold on to the money in an interest-bearing account until the next open enrollment season. Then, the person has another chance to buy insurance. If at this time they don’t purchase a plan, the state will deposit the money into an insurance stabilization fund.

Politics And Policy On The Ground

Maryland is fertile ground for such health care experiments. The ACA remains popular within the state. Polling commissioned by DeMarco’s group puts the law’s support at 62 percent.

In addition, about 52 percent of Marylanders favored a state-based individual mandate, to make up for the federal provision that was repealed.

Democrats control the general assembly, but Gov. Larry Hogan, a Republican, has not offered a specific position on the issue — rather, he alluded to health reform efforts in his State of the State address. “Let’s develop bipartisan solutions to stabilize [health insurance] rates,” he said.

Ed Haislmaier, a senior research fellow at the Heritage Foundation, expressed skepticism about whether this approach will make a difference. The people who are targeted, he argued, are younger, healthier and generally lower-income. They don’t have insurance because they don’t want it, he suggested.

Jason Levitis, a senior fellow at Yale Law School’s Solomon Center for Health Law and Policy who has been instrumental in helping states craft their own versions of the individual mandate, warned that Maryland’s approach could face administrative challenges.

States that follow an approach more closely modeled after the federal mandate, he said, will have an easier time implementing it because regulators have already had five years of experience enforcing it.

Still, Levitis praised the Maryland plan: “There’s something attractive about the idea there, that you put this money … towards coverage.”

And a sampling of state proposals highlight a common theme.

“All the mandate efforts are based on the federal one,” Levitis said. “The variations are what you put on top, [how states] individually keep track of the money people pay and use it for health care services.”

He pointed to Connecticut as an example. It has two bills pending in its legislature — one that closely mirrors the federal mandate, but with slightly lower fines, and another in which the fines would be deposited into health savings accounts for the individuals.

In New Jersey, a Senate panel advanced a two-bill approach this week that would collect a fee from residents who opt against buying health insurance. These fines would then be used to help pay the health care claims of people who are catastrophically ill.

In the District of Columbia, a health care working group recommended an individual mandate nearly identical to the federal one. The plan would require City Council and congressional approval to become law.

Washington state has convened a group to study how to enforce a mandate, and no legislation has been introduced yet in California.

Meanwhile, Maryland officials also hope to learn from the experiences of other states.

For instance, lawmakers in Maryland are considering the creation of a state-based, basic, low-cost health plan as well as a fund to help insurers cope with the burden of very high-cost patients.

These efforts also come from the work of the commission.

Stan Dorn, a senior fellow with the pro-Obamacare group Families USA, said Maryland “had the foresight to see threats coming and to try to be proactive about it.”

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