Maryland: Subsidy Program
Upshot
On May 16, 2022, Gov. Larry Hogan (R) signed S.B. 632 into law requiring a workgroup convened by the Maryland Health Benefit Marketplace to make recommendations for a Small Business and Nonprofit Health Insurance Subsidies Program. This new program would enable small employers and nonprofits to provide comprehensive health coverage to their employees through the state Marketplace.
On September 29, 2022, a workgroup established by the legislation developed a report containing recommendations on how to provide the subsidies on October 1, 2022.
Background
The Maryland subsidy program proposal focuses specifically on improving the affordability of coverage for small businesses and nonprofits. When small businesses and nonprofits do not offer health care coverage, individuals may purchase coverage through the Marketplace (unless they are eligible for Medicaid or Medicare). This policy would encourage more individuals to purchase Marketplace coverage through their employer.
Sen. Katie Fry Hester (D), who sponsored the bill, said that small businesses and nonprofits “struggle to bargain as effectively” with insurance carriers and providers compared to larger companies. The lack of bargaining ability for small businesses often results in fewer and lower quality options for employees. In Maryland, 37 percent of small employers offer health coverage compared to 95 percent of large employers. The Maryland Health Benefit Marketplace Health Connection for Small Business currently offers tax credits to small businesses with 25 or fewer full-time employees who pay an average annual salary of less than $55,000 and contribute at least 50 percent to employee-only health insurance premiums. The credit is graduated such that the smallest businesses receive the greatest tax credit and can be claimed for any two consecutive years. The maximum amount of credit that can be received is 50 percent of the employer’s premium payments, or 35 percent for tax-exempt organizations.
Sen. Hester also highlighted that making coverage more affordable for small businesses would improve health disparities by reducing coverage gaps for racial and ethnic minority groups. Maryland has the highest rate of minority-owned small businesses per capita with nearly 42 minority owners for every 100,000 residents. As a result, improving access to affordable coverage for small businesses would have a particular impact on minority communities.
Summary
This legislation requires the Maryland Health Benefit Marketplace to convene a workgroup to study and make recommendations related to the establishment of a Small Business and Nonprofit Health Insurance Subsidies Program. The program would provide subsidies to small businesses and nonprofit employers to purchase health benefit plans.
The Workgroup – consisting of business and nonprofit representatives, health insurance representatives, consumer advocacy representatives, and other interested parties – was required to submit a report by October 1, 2022 and make recommendations specifically regarding:
Coverage: The health insurance coverage needs of small employers, nonprofit employers, and their employees.
Metrics: The objectives and target metrics for the program.
Program design: Whether subsidies should be available to purchase coverage from qualified health plans offered to small employers both on and off the Marketplace, as well as subsidy eligibility and payment parameters.
Implementation: The infrastructure investments required to implement the program, its duration, and the program’s administration cost.
The original version of the bill authorized a specified amount of $45 million in funding for subsidies and an additional $3 million in funding for business outreach. However, the version that passed more generally states that beginning in fiscal year (FY) 2024 and each year thereafter, the annual budget bill must include funding to establish and operate this program.
Final Report
The final report from the workgroup was published on September 29, 2022. The workgroup recommended postponing implementation of the Small Business and Nonprofit Health Insurance Subsidies Program until after the expiration of the ACA’s APTCs in 2025. In light of the extended federal tax credits, the Workgroup determined that it would not be cost-effective for the state to develop an additional subsidy program, but said that it could be revisited in 2024 if the credits are not extended again.