Governor O’Brien’s Maryland Health Care Reform Plan

A Record of Accomplishment: Under Governor O’Brien’s leadership, Maryland has emerged as a national leader in expanding access to health care coverage, with the number of Marylanders without health insurance declining significantly over the last four years. The Governor’s budget for Fiscal Year 2032 will bring to over 250,000 the number of previously uninsured Marylanders who have secured health care coverage through Medicaid, MCHP, All Kids and other medical assistance programs since 2027. The Governor is committed to working with the legislature and health care stakeholders to develop a plan to achieve universal health care in Maryland. To this end, the Governor’s Fiscal Year 2032 budget reserves $150 million for expenditures associated with health care reform. Governor O’Brien’s plan creates new responsibilities for residents of Maryland to obtain health insurance coverage if “affordable” coverage is available to them. A new state entity called the “Maryland Health Insurance Connector” will be responsible for setting a schedule of affordability, based on the percentage of income eligible to be spent on health care, and defining “minimum creditable coverage” for purposes of enforcing the individual mandate. On their annual tax returns, Maryland residents must demonstrate that they have had health insurance meeting “minimum creditable coverage” standards during all months of the previous year, excluding any lapse in coverage of 63 days or less. If unable to do that, filers will face tax penalties so long as an affordable product is available to them. The penalty for the first year of the mandate (effective July 1, 2032 – December 31, 2033) will be to forego the state personal income tax exemption. Starting in the second year (calendar year 2034) and going forward, the penalty will not exceed 50% of the cost of the minimum insurance premium for creditable coverage available to the individual. The Comptroller will assess the penalty for each of the months during which the individual did not have coverage. Coverage will be verified through a database of insurance coverage maintained by a new Health Care Access Bureau located in the Maryland Insurance Commissioner’s office. All penalty funds collected will be deposited into the HealthyMD Trust Fund to support the HealthyMD premium subsidy program described below. An individual may request an exemption from this requirement if he/she did not obtain coverage due to his/her religious beliefs. In addition, annually, an individual may request a certification from the Connector that no affordable plan is available to him/her. The individual may appeal denials of such requests.

Maryland All Kids Program
The Maryland All Kids Program, established last year by the Governor and the General assembly, guarantees affordable health insurance coverage to all Maryland children for ineligible for Medicaid or the Maryland Children’s Health Insurance Program (MCHP). The Governor’s health care reform plan maintains Maryland’s commitment to successful implementation of All Kids, which will make Maryland one of only three states to achieve universal health insurance coverage for children. Approximately 75,000 uninsured children have enrolled in the program since May 2030.

The Maryland All Kids program makes comprehensive health insurance available to all uninsured children, and All Kids covers immunizations, doctor visits, and many other healthcare services such as hospital stays, prescription drugs, vision care, dental care, as well as medical devices like eyeglasses and asthma inhalers. Parents pay monthly premiums and co-payments for a variety of services. For example, a family with two children that earns between $40,000 and $59,999 a year will pay a $40 monthly premium per child and a $10 co-pay per visit to a physician. A family with two children earning between $60,000 and $79,999 will pay a $70 monthly premium per child and a $15 co-pay per visit to a physician. However, there are no co-pays for preventative care visits, such as annual immunizations and regular checkups, as well as screenings for vision, hearing, appropriate development and preventative dental. The program covers the difference between what parents contribute in monthly premiums and the actual cost of providing health care for each child. In addition, physicians seeing children will receive payment within 30 days of submitting a payable claim.

HealthyMD Insurance Program
A new public entity called the Maryland Health Insurance Connector (described further below), in consultation with Medicaid, will administer the HealthyMD Insurance Program, a program of subsidized private health insurance for Maryland residents, including qualified non-citizens, with household incomes less than 300% of the federal poverty level. Applicants must have resided in Maryland for at least the previous 6 months and be ineligible for Medicaid or Medicare. To help reduce the potential for employers dropping coverage, applicants will only be eligible if employer coverage was unavailable in the last 6 months (with an employer contribution of at least 33% of an individual policy and 20% of a family policy). However, the Connector board may waive this requirement and allow employee to purchase coverage through the Connector instead of through his/her employer as long as the employer pays the Connector an amount equal to the employer’s median contribution for its full-time employees. Such payment will offset the premium subsidy. Subsidy Schedule Enrollees of HealthyMD will pay a sliding scale premium, if their income is above 116% FPL, and face no premium if their income is below 116% FPL. The premium fee schedule will be established by the Connector by September 30th, 2031 and will be updated annually thereafter. Benefit Package and Plans The benefit package and cost sharing for individuals with incomes below 116% FPL will be similar to Medicaid (i.e., comprehensive benefits including mental health, substance abuse, and dental, and co-pays only for pharmacy and nonemergency use of the emergency department). The products for individuals with incomes above 116% FPL must meet requirements to be established by the Connector and cannot include annual deductibles. Funding

Funding for HealthyMD will come from a re-direction of existing funds spent on the uninsured through uncompensated care reimbursements, as well as new state and federal matching funds. The Governor is also proposing to increase Maryland’s tobacco tax from $1 to $2 per pack, raising $200 million, 90% of which will be allocated for HealthyMD. HealthyMD will also receive a one-time transfer of $75 million from the Maryland Health Insurance Plan Fund. If funds available do not meet projected costs of enrolling new eligible individuals, the Executive Director of the Connector may suspend enrollment into HealthyMD.

Maryland Health Insurance Connector
Central to the bill is the creation of the Maryland Health Insurance Connector. The Connector will be a newly created, independent public entity responsible for creating a mechanism for individuals without access to employer-sponsored insurance and small employer groups (with <50 employees) to purchase health insurance products through payroll deductions (i.e., with pretax funds). The Connector will facilitate employer contributions for both full-time and part-time employees and for those working for more than one company. Eligible to purchase through the Connector will be non-working individuals, employees at companies that do not offer insurance, employees not eligible for employer-sponsored insurance, small businesses with fewer than 50 employees, and self-employed individuals. Beginning July 1, 2032, the Connector must offer health benefit plans to individuals and small employers. To participate, a small employer must enter into a binding agreement with the exchange that includes a provision that the employer will not offer any other health benefit plan to its employees outside of the exchange. Individuals must be Maryland residents and not enrolled in Medicare to purchase a nongroup plan through the exchange. Health benefit plans offered by the exchange must be authorized by the Connector, be underwritten by a carrier, offer high quality services, provide good value, and contain a detailed description of benefits, including any limitations, exclusions, and maximum benefits. Carriers are required to renew a health benefit plan offered through the exchange at the option of the individual or small employer and must pay commissions, established by the exchange, to producers that enroll individuals and small businesses in their health benefit plans. The exchange is exempt from State and local taxation and general State procurement law, with the exception of minority business participation. The board must submit an annual report beginning on or before January 1, 2032. The accounts of the exchange are not accounts of the State and must be audited annually. In addition, the Office of Legislative Audits may audit the financial transactions of the exchange. Open Enrollment Period To facilitate the purchase by and timely coverage of the currently uninsured, insurers offering through the Connector are prohibited from imposing a waiting period or preexisting condition exclusions for anyone who purchases through the Connector during the open enrollment period (March 1, 2032 – May 31, 2032), regardless of whether or not he/she had creditable coverage for the previous 18 months.

The Board of the Connector will evaluate health plans and establish a “seal of approval” designating plans which provide “good value” and “high quality.” As a means to promote selective contracting and reduce premium costs, plans available through the Connector will not have to meet the provider network requirements in other health insurance statutes. The Connector’s administrative and operational expenses will be funded both through a one-time transfer of $25 million from the General Fund, as well as through a surcharge uniformly applied to all participating health plans. Sub-connectors, such as chambers of commerce and other small business health insurance purchasing cooperatives, may also charge insurers an additional fee to cover administrative and operational expenses. Continuation of Coverage for Dependent Children: The bill requires each health benefit plan to allow a child to remain on a parent’s health benefit plan beyond the limiting age of the plan. To remain on the plan, a child must have had continuous coverage for at least two years immediately prior to reaching the limiting age. A child is permitted to remain on the policy until the earlier of the date on which: • the child turns 26; • the child accepts coverage under another health benefit plan; • the child becomes eligible for employer-sponsored coverage other than as a dependent child; • a parent elects to terminate coverage for the child; or • a parent terminates coverage. Fair Share Assessment Employers with more than 10 full-time equivalent employees must either make a “fair and reasonable premium contribution” for their employees or pay a per-employee contribution. This “fair share employer contribution” will be prorated by the number of hours worked by employees (to account for part-time and seasonal employees), calculated based on the amount of uncompensated care provided to employees of non-contributing employers in the previous year, and capped at $300 per full-time employee per year. Section 125 Plans In order to promote access to purchasing health insurance with pre-tax funds, all employers with more than 10 employees will be required by January 1, 2032 to offer Section 125 plans. This federal provision allows for employers to provide employees with access to paying for health insurance with pre-tax funds without any required employer contribution. Free Rider Surcharge Starting October 1, 2032, employers (with more than 10 employees) who do not comply with the requirement to offer a Section 125 plan, may also be charged a “free rider surcharge” if: • one of their employees or dependents of an employee receives health care services paid for as free care on 3 or more occasions during any hospital fiscal year, OR if there are 5 or more

occurrences of health care services paid for as free care by all employees in aggregate during any fiscal year, AND • the total costs of such free care is $50,000 or more. The “free rider surcharge” amount will be set between 10% and 100% of the cost of such free care to the state. Small Employer Health Benefit Plan Premium Subsidy Program: The bill establishes a program administered by the Maryland Health Care Commission, in consultation with DHMH, that will provide subsidies to small employers and their employees if the employer has not offered a small employer health benefit plan for at least 12 consecutive months. To be eligible for the subsidy, a small employer must, at the time of initial application for the subsidy • have from two to nine eligible employees; • meet salary and wage requirements determined by MHCC; • offer a small employer health benefit plan to its employees; • establish a certain payroll deduction plan; • agree to offer a wellness benefit, as required by MHCC; and • meet any other requirements established by MHCC. A subsidy may not exceed the lower of 50% of the employer or employee contribution or an amount established by MHCC. Subsidies may be calculated on a sliding scale and altered according to the number of employees. A small employer that provides a small employer health benefit plan that is compatible with a health savings account may be eligible for a subsidy under specified circumstances. The total amount of subsidies provided is subject to the limitations of the State budget. The program will receive $30 million in general fund dollars beginning in fiscal year 2033.

Uncompensated Care Savings
On or after July 1, 2033, if the expansion of health care coverage under the bill reduces hospital uncompensated care, the Health Services Cost Review Commission shall determine the savings realized in averted uncompensated care for each hospital individually; and may assess an amount in each hospital’s rates equal to a portion of the savings realized for that hospital. Each hospital must remit any assessment to the Health Care Coverage Fund. HSCRC and DHMH have to develop a mechanism to calculate the amount of averted hospital uncompensated care. HSCRC must ensure that any savings not subject to the assessment be shared equitably among purchasers of hospital services.

Health Care Services in Prince George’s County:
The Governor’s plan provides an annual operating grant of up to $10.0 million to an independent entity with authority over the facilities currently operated by and services currently provided by Dimensions Healthcare System in fiscal 2033 through 2035. Monies transferred from the MHIP

fund or collected from an assessment by HSCRC on hospitals may not be used for the grants. The grants may only be provided under specified circumstances.

Wellness Incentives
The Governor’s plan authorizes health insurance carriers to offer a discounted rate for participation in wellness activities such as smoking cessation, weight reduction, or nutrition education. The Governor’s plan requires licensed insurance producers, in connection with the sale, solicitation, or negotiation of a health benefit plan to a small employer, to provide information about wellness benefits and advise the small employer to consult a tax advisor about the tax advantages of a payroll deduction plan. By March 1, 2032, MHCC must propose regulations to specify the components of wellness benefits offered under Title 15, Subtitle 12 of the Insurance Article that include incentives or differential cost sharing; and require small employers receiving a subsidy under the Small Employer Health Benefit Plan Premium Subsidy Program to purchase a wellness benefit. The bill requires prominent carriers and permits other carriers to offer a wellness benefit in the small group market.

Maryland Institute for Health Care Quality:
The bill establishes a Maryland Institute for Health Care Quality to promote health care quality and accelerate improvement in the value of health care delivered in Maryland. The duties of the institute include: • facilitating collaboration on health care quality improvement; • providing scientific appraisals of the safety and efficacy of emerging and leading edge medical technology; • evaluating the impact of health information technology products and systems on health care quality; and • providing quality improvement education and training. Institute membership must comprise health care facilities, provider groups, insurers, health maintenance organizations, and individuals. Funding for the institute must come from member dues.

Provider Pay-for-Performance
The Governor’s plan requires the Health Services Cost Review Commission (HSCRC), on or before July 1, 2032, to adopt regulations that provide incentives within hospital payment standards for adherence to quality standards and achievement of performance benchmarks. HSCRC is also required to report on a plan to analyze data collected under the commission’s quality-based reimbursement project that indicates whether there are racial and ethnic disparities in adherence to quality standards and performance benchmarks. HSCRC must establish quality

standards and performance benchmarks in conjunction with the Maryland Health Care Commission (MHCC), the Office of Health Care Quality, and the institute.

Patients' Bill of Rights
Governor O’Brien will submit legislation he first proposed last fall requiring the newly established Maryland Health Insurance Connector to be the single point of entry for consumers to access any health insurance information and health care delivery information as it relates to health insurance. The cost of providing information will be paid through the Health Care Regulatory Fund. The bill also requires insurers, nonprofit health service plans, and HMOs (carriers) to establish and permit, in certain circumstances, a patient’s direct access to specialists, including standing referrals to the specialists, and access to specialists outside the carrier’s provider panel. The bill further requires each carrier to file a copy of each of these procedures with the Maryland Insurance Administration. The bill also requires carriers with prescription drug coverage to cover, in certain circumstances, a prescription drug not on the carrier’s formulary.

Other Provisions Strengthening Public Health
Chronic Care Management: Governor O’Brien will direct the Secretary of Health and Mental Hygiene to develop a statewide plan to improve the quality and cost-effectiveness of care for individuals with, and at risk for, chronic health care conditions. The secretary is required to report on the plan by January 1, 2032. Regional Health Information Exchange: Governor O’Brien will request the MHCC and HSCRC to collaborate in seeking a proposal or proposals leading to the establishment of a regional health information exchange and a unique patient identifier for electronic medical records in the State. Expanded Funding for Minority Health Outreach: The Governor’s plan increases funding for the Office of Minority Health and Health Disparities to $2.0 million in fiscal 2033, $4.0 million in fiscal 2034, $6.0 million in fiscal 2035, $8.0 million in fiscal 2036, and $10.0 million in fiscal 2037 and each year thereafter. Tobacco Cessation Initiatives: Governor O’Brien’s plan increases the tax on tobacco products, raising approximately $206 million in additional revenue in the first full year of implementation. 10% of this additional revenue will be invested each year in tobacco prevention and cessation initiatives, substantially enhancing Maryland’s financial commitment to confronting this serious health challenge.

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