As a growing number of Republican-led states look for end runs around the Affordable Care Act, Iowa is embracing a strategy that contends that not all health plans are actually health insurance.
Gov. Kim Reynolds (R) on Monday signed into law a bill allowing the century-old Iowa Farm Bureau to collaborate with the state’s dominant insurer to sell “health benefit plans,” which are expected to cost health customers less than ACA coverage because they will not have to comply with federal requirements.
The law says such plans “sponsored by a nonprofit agricultural organization . . . shall be deemed not to be insurance.” That means they will be allowed to avoid both federal and state insurance regulations.
Within Iowa, this new curve around the ACA has sparked debate over whether the strategy is a creative path to offer some residents an alternative to spiking prices in the insurance marketplace the state created under the federal law — or a path to substandard coverage that will divide the healthy from the sick.
More broadly, the strategy is among the ripple effects across the country from Congress and the Trump administration having decreed that Americans who flout the law’s individual insurance mandate will no longer be charged penalties. When enforcement of the mandate ends next year, consumers will not risk a fine for being uninsured or having health coverage that lacks some of the ACA’s required benefits and consumer protections.
Despite congressional Republicans’ failure last year to repeal much of the sprawling 2010 health-care law, the recent moves by both the federal government and GOP states are nevertheless chipping away at a central goal of the Democrats who created it: fostering comprehensive coverage nationwide for people without access to affordable health benefits through a job, while prohibiting insurance industry practices that often had put health plans out of reach for individuals with prior or current medical problems.
“If the ACA’s insurance rules can’t be repealed, then an alternative is to get people the option of escaping them,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. “Without the penalty, the door is wide open for plans like this.”
Iowa lawmakers approved the Farm Bureau plan last month as federal agencies are taking steps to carry out a directive by President Trump to make it easier for Americans to buy coverage that skirts those requirements.
In January, the Labor Department proposed new rules that would widen access to association health plans — originally intended for small businesses that band together — by enabling individual consumers to buy them and reclassifying them so that such plans do not have to include such benefits as maternity care and mental health services. The Iowa measure also allows the sale of association health plans that follow the new federal rules.
Then in February, the Department of Health and Human Services proposed to broaden Americans’ ability to rely on short-term health plans that similarly circumvent the ACA’s required benefits and protections. Such plans could be sold for up to a year, rather than the current three months, and federal officials have said they would like them to be renewable from year to year.
Meanwhile, Idaho is attempting a different route around the ACA rules. Gov. C.L. “Butch” Otter in January issued an executive order to allow insurers to sell health plans missing some of the federal requirements as long as the companies also sell at least one plan inside Idaho’s ACA marketplace. The federal Centers for Medicare and Medicaid Services (CMS) recently told Idaho officials that the approach appears likely to be illegal, but it has been holding meetings and conference calls to try to work out a solution.
For Iowa, the Farm Bureau plan is the state’s second attempt to bypass parts of the ACA. Last year, the state’s insurance commissioner asked federal health officials to allow Iowa to take about $350 million in ACA money for 2018 and use it in different ways to help people pay for plans outside the marketplace. State officials said at first that the Trump administration seemed receptive. But when the government had not given approval as last fall’s ACA enrollment season neared, Iowa withdrew the proposal.
The Hawkeye State’s latest strategy has a back-to-the-future quality. Starting in 1969, the nonprofit Iowa Farm Bureau sold Wellmark Blue Cross and Blue Shield policies to its members. The arrangement ended when the ACA came along, because those health plans did not meet the federal law’s rules and would have exposed consumers to penalties.
Wellmark, the state’s largest health insurer, had sold ACA plans but announced last spring that it would pull out of that marketplace in 2018. Aetna also withdrew, and the only marketplace insurer remaining, Medica, raised its prices by an average of 57 percent.
Iowa Insurance Commissioner Doug Ommen said that he is officially undecided about the new Farm Bureau law but that he sympathizes with the need for more-affordable coverage. As consumers have been “hammered” by the ACA rates, he said, enrollment in Iowa’s marketplace has tumbled from nearly 75,000 in 2016 to about 61,000 last fall to 46,000 last month.
The dropouts are primarily people with incomes too high to qualify for ACA subsidies. That is the group Iowa officials expect to be attracted to the new coverage, which is why Ommen predicts it will not undercut the marketplace.
Kaiser’s Levitt said defining some Wellmark health plans as not insurance “is weird.” The unregulated plans, he said, could prompt questions about their financial solvency or whether dissatisfied customers have appeal rights.
According to Ommen, the Farm Bureau modeled its idea after a similar arrangement sponsored by the Tennessee Farm Bureau, which began decades ago and has continued in the ACA era. The Obama administration never challenged it.
CMS did not respond to a request for its view on Iowa’s new law.
Iowa Farm Bureau spokeswoman Laurie Johns said that about 15,000 members contacted their state legislators to support the bill. The new plans could be on sale through bureau agents in every county as early as the fall, for current members or anyone who pays a $55 annual fee to join, she said.
In a bill-signing ceremony at the State Capitol in Des Moines, the governor contended that Iowa’s individual insurance market had ample choices and “reasonable” premiums before the ACA left it “in collapse.” After urging Congress to “fix this problem,” Reynolds recounted Monday, she decided “we are done waiting” and urged state lawmakers to find their own solution. “That is exactly what they did.”
Rose Danaher, a beef farmer and one of two consumers the governor invited to speak at the ceremony, said the law “opens the door for the Iowa Farm Bureau to restore health benefits and peace of mind.”
After her ACA insurer left the state, she couldn’t afford the only plan that remained, Danaher said. “There is no reason a healthy 32-year-old should be paying more for health insurance than for her mortgage.”
The bureau and Wellmark still must decide on the benefits and rates, as well as questions such as how to handle people with medical conditions. “The details have yet to be worked out,” Johns said.