Maryland lawmakers hit pause this week after explosive whistleblower testimony alleged that some of the state's nonprofit hospital systems quietly shifted billions of dollars into offshore insurance subsidiaries. The claims prompted senators to order a formal review and temporarily freeze certain tax enforcement, turning a typically wonky topic into a rare, bipartisan deep dive into hospital finances in Annapolis.
Yesterday, whistleblower Jason Schupp told a Senate committee that at least 10 nonprofit hospitals created offshore, for-profit subsidiaries and routed what he described as billions in proceeds into them. He testified that the setup is already costing Maryland roughly $30 million and said the transfers totaled at least $1.8 billion, with money sent to offshore domiciles such as the Cayman Islands, according to The Baltimore Sun.
In response, lawmakers advanced SB 890, sponsored by Sen. Dawn Gile. The bill would pause collection of the premium-receipts tax on captive insurance used by nonprofit hospitals while the state studies how these arrangements actually work in practice. It directs the Maryland Insurance Administration to examine how captive insurers are used, regulated, and taxed, and to deliver findings to the General Assembly by Dec. 1, 2027. While that study is underway, the bill also suspends certain related tax, penalty, and interest collections. The full bill text and amendments are available on the Maryland General Assembly website.
The Maryland Hospital Association pushed back hard on the idea that hospitals are "hiding" money. Captive insurance is a legitimate risk-management tool, not a shell game, MHA spokesman Andrew Nicklas told reporters. The association said it supports a state study of the issue but has sought amendments that would, going forward, require a 3% premium assessment when hospitals use captives to buy additional coverage, according to The Baltimore Sun.
Captive insurers are companies owned by their policyholders, in this case, hospital systems, and are typically used to cover hard-to-insure risks like malpractice or cyberattacks. Many of these captives have historically been set up offshore because Maryland has not built out its own in-state domicile for them, a key piece of context reported by Maryland Matters.
Legal and regulatory stakes
The heart of the current bill is its moratorium language. SB 890 would bar the Maryland Insurance Administration from charging or collecting certain unpaid premium-receipts taxes, penalties, or interest tied to captive insurance while the study is in progress. That pause could limit the state's ability to chase potential past liabilities, at least for now. The carve-out, and the larger question of whether earlier transfers into these captives should have been taxed under Maryland law, is what regulators are being asked to untangle during the review. The detailed language is posted on the Maryland General Assembly site.
What's next
As SB 890 moved through the Senate, lawmakers added amendments and stressed that they want the Insurance Administration's independent findings before deciding whether to push for retroactive tax collections or broader changes to how captive insurance is handled in the state. Legislative trackers show each step the bill takes through committee and floor votes, and policy watchers can follow along on sites that monitor Maryland legislation, including LegiScan.
