BEYOND THE NUMBERS
Iowa lawmakers are considering exempting health plans offered by the state’s Farm Bureau from the Affordable Care Act’s (ACA) benefit standards and consumer protections. That would generate premium hikes in Iowa’s individual insurance market in 2019 and expose enrollees in the new plans to high costs and benefit gaps if they get sick.
The Iowa legislation, proposed in the state House and Senate, would exempt health plans that the state’s Farm Bureau offers from both state and federal insurance regulation. The plans thus could deny coverage to people with pre-existing conditions, provide coverage to such people but decline to cover their pre-existing conditions, and charge far higher premiums based on a person’s health status and age. The plans wouldn’t have to cover the ACA’s “essential health benefits” such as maternity care, mental health services, substance-use disorder treatment, and prescription medications, and they could impose annual limits on coverage.
This proposal would worsen an especially problematic feature of Iowa’s individual insurance market: more than half of those who bought private coverage on their own are enrolled in plans that pre-date the ACA’s major coverage reforms, including Farm Bureau plans. These plans are exempt from ACA rules, including prohibitions on discrimination based on pre-existing conditions and requirements to cover essential health benefits.
In Iowa far more than in most other states, healthier people have kept this skimpier — and therefore lower-cost — coverage, which keeps them out of the ACA individual-market risk pool. That drives up premiums for more comprehensive coverage, particularly for people with incomes that are too high to qualify for ACA premium tax credits that help low- and moderate-income people buy coverage. It may also have discouraged insurers from participating in the ACA market: only one insurer, Medica, now offers ACA marketplace plans in the state, although Wellmark, the state’s largest insurer, plans to re-enter the market in 2019.
Iowa’s pre-ACA plans can’t enroll new people, which limits the damage to the ACA risk pool that would occur if more healthier people were enrolling in pre-ACA plans. But the legislation in question would effectively lift that safeguard. Any Iowan who wanted to become a dues-paying member of the Iowa Farm Bureau — whether working in agriculture or not — apparently could apply for one of these plans rather than a more comprehensive ACA-compliant plan.
That would have two harmful effects. First, anyone who got sick while covered by one of these plans could face benefit gaps, high out-of-pocket costs, and higher premiums. Second, as healthier people left the ACA-compliant market in favor of these skimpier plans, premiums for comprehensive coverage would rise.
The Iowa proposal is inspired by a similar 1993 law in Tennessee. In recent years, Tennessee’s individual market has been among the nation’s more fragile ones, with high-profile insurer exits and significant premium increases for people not eligible for ACA tax credits. And in Tennessee, unlike most states, premiums for individual market coverage were far above those for employer coverage last year. The plans that Tennessee’s Farm Bureau offers are a likely factor: they have a significant market share in the state and likely pull healthier Tennesseans out of the ACA market, as the Iowa plans would do.
We don’t know what Iowa’s Farm Bureau plans would look like if the legislation were enacted – virtually anything is possible when the usual insurance rules don’t apply. But the pre-ACA plans that the Farm Bureau offered in partnership with health insurer Wellmark are likely a good blueprint. Based on publicly available marketing materials, some of those plans:
- Exclude people’s pre-existing conditions from coverage if they were recently uninsured;
- May deny coverage or charge higher premiums to people based on their health conditions and medical history;
- Exclude coverage of maternity care, mental health services, and substance-use disorder treatment from some plans;
- Exclude coverage of some health care providers, such as community mental health centers, “chemical dependence” treatment facilities, and psychologists; and
- Impose very high out-of-pocket costs on enrollees who use medical care. For example, the annual deductibles for one product could be as high as $10,000 for an individual or $30,000 for a family – far more than ACA-compliant plans can impose. The annual limits on an enrollee’s overall out-of-pocket spending could also be much higher than under the ACA ($12,500 for an individual under one Farm Bureau plan, compared to no more than $7,350 in ACA plans) and don’t include copayments as part of that out-of-pocket spending as ACA plans must do.
In addition, the Farm Bureau plans wouldn’t be subject to regulation by the state’s insurance department, which traditionally oversees whether insurers are financially solvent, charge appropriate premiums, and meet their obligations to consumers.
Proponents say the Farm Bureau proposal is needed to provide affordable coverage in a struggling market. But that’s the same argument that Iowa leaders made last year for their harmful and disruptive proposal to remake the individual market under a federal waiver. Instead, the state ended up withdrawing its waiver request, Medica offered marketplace plans, and tens of thousands of people enrolled in comprehensive ACA-compliant coverage. Iowa lawmakers should consider practical solutions to improve affordability and increase competition, not use market challenges as an excuse to further segment the market and undermine access to comprehensive coverage for people with pre-existing conditions.
The Iowa proposal comes as the Trump Administration and some other states look to create health coverage options that are an alternative to the ACA and operate under much weaker rules. For example, Idaho’s governor wants insurers to offer plans that don’t meet ACA standards, and the Trump Administration has proposed expanding short-term plans that also don’t meet those standards. All of these proposals would have harmful consequences like those of the Iowa legislation: enrollees in skimpy plans would face catastrophic costs if they got sick, and middle-income people with serious health needs would face rising premiums for comprehensive coverage.