BEYOND THE NUMBERS
Iowa Can Strengthen Health Insurance Market Without Harming Consumers
Now that Iowa has withdrawn its request for a federal “1332 waiver” to allow it to change its health insurance market, some state officials are blaming what they say are overly strict federal requirements for approving such waivers. But, in reality, those requirements served their intended purpose of protecting consumers. While Iowa’s individual market faces challenges, Iowa consumers will benefit from the fact that the marketplace coverage on which they have come to depend will still be available when open enrollment begins on November 1.
In its waiver, Iowa proposed eliminating the Affordable Care Act (ACA) marketplace that consumers have used since 2014 to apply for coverage and subsidies, creating one standard health plan for all individual market consumers, providing a flat premium credit based on age and income to every enrollee (including those with high incomes), and establishing a reinsurance program to shield insurers from the financial risk of high-cost enrollees.
Federal law requires states to show that their section 1332 waivers will provide coverage that’s at least as affordable and comprehensive as under current law and will cover as many people, without increasing the federal budget deficit. These “guardrails” helped protect consumers from Iowa’s severely flawed proposal:
- Iowa’s waiver would have made it harder to sign up for coverage. The waiver would probably have raised the number of uninsured individuals by making enrolling far more cumbersome. Iowans now use HealthCare.gov to receive a federal determination of eligibility, pick a plan, and then go directly to the insurer’s website to pay the first month’s premium — often in one sitting. Under the waiver, enrollees would have had to visit a new website to complete an eligibility application, wait up to ten days for the state to respond by mail, and then find an insurer or an insurance agent to actually help them enroll in a plan.
It was far from clear that the state’s website would be ready in time, or that thousands of Iowans could complete this lengthy, multi-step process in the six-week open enrollment period. On top of that, the waiver would have eliminated automatic re-enrollment for current marketplace consumers.
- Iowa’s waiver would have made health care less affordable for many. The waiver would have required everyone with incomes over 200 percent of the poverty line to enroll in a plan with a $7,350 deductible. Under the ACA, Iowans with incomes up to 250 percent of poverty can get cost-sharing reductions, which lower their deductibles and co-payments. And Iowans at all income levels can buy a “gold plan” with a $1,000 deductible in 2018, which wouldn’t have been an option under Iowa’s waiver.
- The state’s unrealistic funding assumptions would have put coverage and care for even more Iowans at risk. The waiver relied on unrealistic assumptions about the cost of the proposed changes, as outside analysts found and the Trump Administration’s response to Iowa implied. Had the waiver received federal approval, the federal government would have been legally precluded from providing more funding than Iowa would receive under current law. That would likely have left the state with a funding shortfall, forcing it to make cuts in 2018 by reducing people’s coverage, raising premiums or cost-sharing charges, or reducing enrollment.
Iowa’s marketplace will be open for new enrollment on November 1. Iowa’s decision to drop the waiver clarifies that individual market consumers can shop for coverage using HealthCare.gov, just as they have for several years. An insurer, Medica, has proposed plans in all of the state’s 99 counties, and most of the available plans have lower deductibles than those that would have been available under the waiver.
While Iowans are understandably concerned about reported premium increases, an estimated 75 percent to 80 percent of Iowans in the ACA-compliant individual market will be eligible for premium tax credits that grow in response to premium increases, limiting consumers’ costs to a set percentage of their incomes. Also, many people with low incomes can enroll in a “silver plan” with reduced deductibles and other cost sharing due to the ACA’s cost-sharing reductions.
After withdrawing its waiver, Iowa can now turn to more practical and less disruptive proposals to improve affordability and increase competition in its insurance market. Like other states’ individual markets, Iowa’s market has been hurt by Trump Administration actions that undermine the ACA marketplaces. For example, Medica reports that about one-fifth of its proposed rate increase reflects the risk that the federal government would stop reimbursing insurers for cost-sharing reductions, as the Administration has chosen to do. In addition, Iowa’s individual market has experienced greater challenges than most other states’, in part reflecting Iowa’s policy choices. To address these challenges without undermining coverage for current marketplace consumers, Iowa should consider:
- Creating a reinsurance program similar to Alaska’s, which would reduce premiums for Iowans with incomes too high to qualify for marketplace subsidies. A reinsurance program was one element of the Iowa waiver, but the state could easily implement it without the waiver’s harmful changes.
- Phasing out more pre-ACA plans (“transition” and “grandfathered” plans) as soon as possible. These plans are exempt from many of the ACA’s consumer protections and continue — several years after the law’s implementation — to keep healthier enrollees away from the ACA marketplaces. About 76,000 Iowans are expected to remain in these plans in 2018, compared to 51,000 to 55,000 who are expected to enroll in the marketplace. That pushes up premiums for ACA-compliant plans because these plans attract fewer of the healthier potential enrollees than otherwise, and it thus creates an uneven playing field for insurers that might otherwise participate.
- Avoiding actions that would further skew Iowa’s risk pool. Gov. Kim Reynolds said Monday that “short-term” health insurance that doesn’t meet ACA standards could be a solution for Iowa consumers in 2018. That refers to President Trump’s recent executive order< directing federal agencies to (among other things) consider ways to make short-term plans, which currently may last no more than three months, last nearly a full year, which would make them a full-scale alternative to the ACA market — even though they don’t have to cover the ACA’s essential health benefits such as maternity care and mental health treatment, and even though they can base premiums on people’s health status. That’s not a good solution for Iowa. Making short-term plans more widely available would pull even more healthy consumers out of the ACA market, dramatically increasing the state’s already serious challenges while leaving many consumers in extremely skimpy plans and leaving those in ACA-compliant plans with even higher premiums.