HB 780
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
House Bill 780 (Delegate Kerr)
Health and Government Operations Finance
Maryland Health Benefit Exchange – State–Based Young Adult Health
Insurance Subsidies Pilot Program
This bill requires the Maryland Health Benefit Exchange (MHBE), in consultation with the
Insurance Commissioner and as approved by the MHBE board, to establish and implement
a State-Based Young Adult Health Insurance Subsidies Pilot Program. Subject to available
funds, in fiscal 2022 through 2024, MHBE may designate funds from the MHBE Fund to
be used for the pilot program so that no more than $20.0 million in annual subsidies may
be provided in calendar 2022 and 2023. By January 1, 2022, MHBE must adopt regulations
implementing the program. MHBE must track specified information about the pilot
program, which must be posted on the MHBE website and included in the MHBE annual
report. The bill takes effect July 1, 2021, and terminates June 30, 2024.
Fiscal Summary
State Effect: MHBE special fund expenditures increase by $291,000 in FY 2022, and
$171,000 in FY 2023 and 2024, for information technology changes that can likely be
absorbed within existing budgeted resources (and, thus, are not reflected below). Special
fund expenditures further increase by as much as $10.0 million in FY 2022, $20.0 million
in FY 2023, and $10.0 million in FY 2024 to provide subsidies as specified under the bill.
General fund revenues are affected only to the extent reversions are lower than they
otherwise would be (not shown below).
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Revenues $0 $0 $0 $0 $0
SF Expenditure 10,000,000 20,000,000 10,000,000 0 0
Net Effect ($10,000,000) ($20,000,000) ($10,000,000) $0 $0
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: None.
Small Business Effect: None.
Analysis
Bill Summary: The pilot program must be designed to reduce the amount that young
adults pay for health benefit plans in the individual health insurance market and target
young adults who are not directly impacted by the State Reinsurance Program.
MHBE, in consultation with the Insurance Commissioner and as approved by the MHBE
board, must establish eligibility and payment parameters for calendar 2022 and 2023. In
determining the parameters, MHBE must consider (1) young adults between 18 and
40 years of age and (2) income groups between 133% and 400% of the federal poverty
level. For 2021, this equates to income for a single individual ranging from $17,130 to
$51,520.
The purpose and allowed uses of the MHBE Fund are expanded to include providing
funding for the establishment and operation of the pilot program. The MHBE Fund
includes any funds designated by the State to provide State-based health insurance
subsidies to young adults in the State. The MHBE board must maintain a separate account
within the fund for the pilot program. Administration and operation of the pilot program
may include functions delegated by MHBE to a third party.
The bill specifies that any pass-through funds received from the federal government under
a specified waiver may be used only to provide reinsurance to carriers that offer individual
health benefit plans in the State.
Current Law: MHBE was created during the 2011 session to provide a marketplace for
individuals and small businesses to purchase affordable health coverage. Through the
Maryland Health Connection, Maryland residents can shop for health insurance plans,
compare rates, and determine their eligibility for federal advanced premium tax credits,
cost-sharing reduction plans, and public assistance programs such as Medicaid. MHBE is
funded in part from a mandated $35.0 million diversion of premium tax revenues that
would otherwise go to the general fund. However, any of these special funds that remain
unspent at fiscal year closeout revert to the general fund. In recent years, MHBE has not
spent all of the mandated appropriation.
Chapters 37 and 38 of 2018 established a health insurance provider fee assessment on
specified entities for calendar 2019 only. In addition to other amounts due, an insurer, a
nonprofit health service plan, a health maintenance organization, a dental plan
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organization, a fraternal benefit organization, a Medicaid managed care organization, and
any other person subject to State regulation that provides a product that is subject to a
specified federal fee was subject to an assessment of 2.75% on all amounts used to calculate
the entity’s premium tax liability or the amount of the entity’s premium tax exemption
value for calendar 2018. The purpose of the assessment was to recoup the aggregate amount
of the health insurance provider fee that otherwise would have been assessed under the
federal Patient Protection and Affordable Care Act that was attributable to State health risk
for calendar 2019 as a bridge to stability in the individual market.
Chapters 597 and 598 of 2019 extended the health insurance provider fee assessment
through calendar 2023. In calendar 2020 through 2023, the amount of the assessment must
be 1% on all amounts used to calculate the entity’s premium tax liability for the
immediately preceding calendar year.
Assessment revenue is distributed to the MHBE Fund, which may be used only for the
operation and administration of MHBE and for the establishment and operation of the
State Reinsurance Program.
Chapters 104 and 105 of 2020 required MHBE to submit a report to the Senate Finance
and House Health and Government Operations committees on the potential design,
implementation, and effects of establishing State-based, individual market health insurance
subsidies in Maryland, as well as an analysis of the appropriate allocation of available
funding between subsidies and reinsurance. MHBE worked with Lewis & Ellis Actuarial
Consultants, in consultation with the Maryland Insurance Administration (MIA), to model
the design and impact of State subsidies on the populations targeted, the individual market
overall, and the reinsurance program. Lewis & Ellis produced a report detailing their
evaluation, which MHBE published for public comment in October 2020. To gather
additional feedback on the proposed subsidy designs, MHBE formed an individual subsidy
workgroup. On December 1, 2020, MHBE submitted the report required under
Chapters 104 and 105, which incorporates the Lewis & Ellis analysis, public comments,
and the workgroup report (which recommended a subsidy be targeted to young adults).
State Expenditures:
Administrative Expenses
MHBE special fund expenditures increase by $291,000 in fiscal 2022, which accounts for
the bill’s July 1, 2021 effective date. This estimate reflects the cost of implementing
changes to the eligibility and enrollment platform to calculate subsidies, including system
changes, programming, and testing. Ongoing maintenance of these changes is estimated at
$171,000 in fiscal 2023 and 2024. These administrative costs can be absorbed within the
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existing $35.0 million annual appropriation for MHBE as the mandated appropriation has
not been fully spent in recent years.
The Department of Legislative Services (DLS) notes that the Budget Reconciliation and
Financing Act (BRFA) of 2021 includes a provision that reduces the annual mandated
appropriation to MHBE from $35.0 million to $32.0 million beginning in fiscal 2022. The
Governor’s proposed fiscal 2022 budget includes a $3.0 million special fund reduction and
a $4.16 million federal fund reduction, contingent on legislation altering the mandate.
Designated Funds
Subject to available funds, MHBE may designate funds from the MHBE Fund so that up
to $20.0 million in annual subsidies may be provided. Thus, special fund expenditures
increase by as much as $10.0 million in fiscal 2022 to provide six months of subsidies for
the pilot program for the first half of calendar 2022. In fiscal 2023, special fund
expenditures increase by as much as $20.0 million to provide subsidies for the pilot
program for the second half of calendar 2022 and the first half of calendar 2023. In
fiscal 2024, special fund expenditures increase as much as $10.0 million to provide
subsidies for the pilot program for the second half of calendar 2023. The pilot program
terminates at the end of fiscal 2024.
Based on 2019 and 2020 health insurance provider fee assessment collections, the
estimated balance of the MHBE Fund is $446.0 million. As of July 2020, annual revenues
to the fund are estimated by MIA to be $112.6 million in calendar 2021, $118.9 million in
calendar 2022, and $125.6 million in calendar 2023 (the assessment ends after
calendar 2023).
DLS notes that the BRFA of 2021 also includes a provision that requires transfers, in each
of fiscal 2021 through 2026, of $100.0 million of health insurance provider fee assessment
revenue to Medicaid, with the remaining revenue provided to the MHBE Fund. The
Governor’s proposed fiscal 2022 budget includes general fund reductions of $100.0 million
in fiscal 2021 and 2022, contingent on legislation authorizing the transfer. In addition, the
Governor’s proposed fiscal 2022 budget includes a $100.0 million special fund fiscal 2021
deficiency appropriation, contingent on legislation authorizing the transfer.
Additional Information
Prior Introductions: None.
Designated Cross File: SB 729 (Senator Feldman) - Finance.
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Information Source(s): Department of Budget and Management; Maryland Health
Benefit Exchange; Maryland Insurance Administration; Department of Legislative
Services
Fiscal Note History: First Reader - February 17, 2021
rh/ljm Third Reader - March 18, 2021
Revised - Amendment(s) - March 18, 2021
Analysis by: Jennifer B. Chasse Direct Inquiries to:
(410) 946-5510
(301) 970-5510
HB 780/ Page 5


Statutes affected:
Text - First - Maryland Health Benefit Exchange – State–Based Young Adult Health Insurance Subsidies Pilot Program: 31-107 Insurance, 6-103.2 Insurance, 31-122 Insurance, 31-119 Insurance
Text - Third - Maryland Health Benefit Exchange – State–Based Young Adult Health Insurance Subsidies Pilot Program: 31-107 Insurance, 6-103.2 Insurance, 31-122 Insurance, 31-119 Insurance