MHBE allowance rises $140.7M as reinsurance and state subsidy costs climb

Victoria Martinez, an analyst for the Department of Legislative Services, told the Health and Human Services Subcommittee that the Maryland Health Benefit Exchange’s fiscal 2027 allowance increases by $140.7 million, or 17%, to $957 million. She said about 87% of the exchange’s budget is devoted to reinsurance and state subsidy payments, and that the largest single drivers of the increase are a $79 million rise in reinsurance payments and $40 million for the state subsidy program.

Martinez highlighted two federal developments shaping the marketplace: implementation of CMS’s marketplace-integrity rules, which change verification and special-enrollment-period assistance, and the end of the enhanced premium tax credits that were authorized by the American Rescue Plan Act and extended by the Inflation Reduction Act through 2025. "Exhibit seven shows an average year-to-year premium change of about 13% in 2026," Martinez said, presenting DLS exhibits on premiums and plan selections.

Michelle Eberly, executive director of the Maryland Health Benefit Exchange, said the exchange launched several technology initiatives intended to improve customer service and reduce costs. She said an AI-assisted case-status feature handled 8,600 enrollment-related calls during its pilot and the exchange’s virtual assistant handled 1.7 million queries in 2025. "We’re usually in a very controlled manner, but we launched an AI enrollment status this year which has allowed consumers to get really immediate updates on their cases," Eberly said.

Eberly confirmed DLS’s assessment that the exchange’s fiscal 2027 personnel request includes 12 new regular positions to implement Medicaid eligibility and enrollment changes required by recently enacted law. She told lawmakers the reinsurance fund supports both the reinsurance program and the state premium-assistance program and that the board can change premium-assistance parameters if necessary to protect the fund. "The board also has the option to take action to reduce costs this calendar year by reducing subsidy amounts for those who newly enroll later in the year," Eberly said.

The exchange identified the state subsidy program’s funding source as the same provider-fee assessment that supports reinsurance (a 1% state provider fee assessment). DLS also noted a budget amendment that added $52.3 million to cover subsidies for the second half of fiscal 2026 and the budget includes $26 million for the young adult subsidy program that was incorporated into the state subsidy.

DLS recommended committee narrative requesting a report on the reinsurance and state subsidy program cost and forecast so lawmakers can track fund solvency and potential impacts on premiums and enrollment. Eberly and other exchange officials said they will continue modeling and present updated recommendations to the board when more data are available.