Without a Fix, Thousands of Iowans' Health Insurance Coverage is in Jeopardy
Update: On October 12, 2017, President Trump announced that he would be ending CSR payments effective October 18, 2017.
Update: Iowa's final waiver request was sent to the federal agencies on August 21, 2017. On August 16, 2017, Medica filed an amended rate request that seeks a 56.7% premium increase for its 2018 plans. For updates regarding this developments, read this post.
Iowa is facing a crisis in its individual health insurance market. According to the Iowa Insurance Commissioner, absent a fix, thousands of Iowans buying health insurance on the individual market, including many farmers, will face exorbitant 2018 premiums, realistically denying them the possibility of purchasing health care coverage. All insurers but one have pulled out of Iowa’s individual health care market for 2018. And Medica, a Minnesota-based health care insurance provider that says it will stay, will be raising premiums by at least 43.5%. This is in addition to significant premium increases that have already occurred during the past several years. If Medica ultimately chooses to exit, approximately 72,000 Iowans will be left without healthcare insurance options.
Those 72,000 Iowans are the ones who purchase healthcare insurance on the individual market. 44,000 of those currently purchase government-subsidized plans through the online Affordable Care Act (ACA) Marketplace. These include Iowans with incomes at or below 400% of the Federal Poverty Level (FPL). If Medica pulls out, these Iowans will have no health insurance options. If Medica remains, federal taxpayers will fund the substantial increase in these Iowans’ premiums. An additional 28,000 Iowans purchase insurance on the individual market but do not qualify for subsidies under the ACA because their income is above 400% of the FPL.
This means that an individual earning $47,000 a year (< 400% FPL) qualifies for subsidized coverage with an unlimited cap, but an individual earning $48,600 a year (> 400% FPL) does not. Unless a stopgap measure is implemented, a young family of four making $100,000 a year will be faced with $24,820 / year insurance premiums in 2018 if they buy insurance on the individual market. Yet, if they earned just $3,000 less, they would fall within 400% of the FPL, they would qualify for subsidized coverage, and the maximum they would be required to pay for coverage would be $9,500 /year. Married 55-year-old self-employed individuals with $66,000 in income would face an estimated $29,130 yearly premium in 2018. Yet, if they earned just $2,000 less, they would qualify for subsidized coverage, and their maximum yearly premium would be $6,200.
The Individual Market
As stated above, this immediate problem impacts Iowans purchasing insurance on the ACA-compliant individual market. This includes those who don’t have insurance through their employer, the government (i.e. Medicaid or Medicare), or a special “grandfathered” or “grandmothered” plan. This includes young people aging out of their parents’ insurance plans, retirees who are not yet eligible for Medicare, and the self-employed, including many farmers. And the problem could grow much worse. Approximately 85,000 current insurance plans are hanging by a thread, so to speak. Some of these are non-ACA-compliant grandfathered plans, those purchased on the individual healthcare market before 2010. The ACA allows those plans to continue only as long as the insurer does not change the plan and as long as the insured pays the premium. If the insured leaves such a plan, he or she can only purchase an ACA-compliant plan. No new insureds can join these pools. Wellmark Blue Cross and Blue Shield has continued and will continue to offer the majority of grandfathered plans in 2018. The others are non-ACA-compliant transitional (grandmothered) plans issued from 2010 to 2013. The future of grandmothered plans is perhaps even more tenuous. They have been allowed to remain only through a yearly extension offered by the Centers for Medicare and Medicaid Services, but they will end entirely after December 2018 absent a change in the law.
Iowa's Healthcare Insurance Market at a Glance
According to numbers provided by the Iowa Insurance Division (IID)[i], the landscape of Iowa’s overall healthcare insurance market is as follows:
- 1,614,568 Iowans (53%) are covered by employer-based plans
- 517,880 Iowans (17%) are covered by Medicaid (increased by 144,000 due to ACA Medicaid expansion)
- 456,953 Iowans (15%) are covered by Medicare
- 243,708 Iowans (8%) are covered by non-employer plans
- 72,000 Iowans are covered by ACA-compliant individual plans
- 44,000 in subsidized plans (purchased on the ACA healthcare exchange)
- 28,000 in unsubsidized plans (purchased off of the exchange)
- 85,000 are on grandfathered plans (pre-ACA plans issued before 2010) or non-ACA compliant transitional (grandmothered) plans issued from 2010 through 2013.
- 72,000 Iowans are covered by ACA-compliant individual plans
- 152,318 Iowans (5%) are uninsured
- 30,464 Iowans (1%) are covered by other public plans
The Iowa Stopgap Measure Proposal
In an attempt to temporarily stabilize the individual healthcare market for 2018 and allow all Iowans an option for purchasing healthcare coverage, the IID has requested emergency regulatory relief from the Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Health and Human Services, and the U.S. Department of Treasury. Called the Iowa Stopgap Measure, the IID’s formal “state innovation waiver” request was initially made in June pursuant to Section 1332 of the ACA. At this time, no insurer had agreed to offer ACA-compliant plans in Iowa's individual healthcare market. The current draft is dated July 13, 2017. It followed Medica's filing of rates for plans to be sold in all 99 Iowa counties.
Background. Section 1332 allows states to pursue “innovative strategies to provide their residents with access to high quality, affordable health coverage.” In reality, these waivers are requested to place faltering individual markets on life support. Essentially, the states can request permission to use federal moneys that would otherwise fund advanced premium tax credits or cost sharing reductions in other ways, such as to provide reinsurance to insurers in an effort to drive down premiums.
Under a waiver, the states must provide access to quality health care that: 1) is at least as comprehensive and affordable as would be provided absent the waiver, 2) provides coverage to a comparable number of residents of the state as would be provided coverage absent a waiver, and 3) does not increase the federal deficit. CMS has already granted waivers under this provision to Alaska and Hawaii. An application from Minnesota is pending. Several other states are also considering waiver applications.
Iowa's Plan. The Iowa Stopgap Measure proposes to reallocate federal dollars that would be spent on advance premium tax credits (APTC) and cost sharing reduction payments (if available)[ii] (approximately $48 million in 2017) toward implementing a newly designed individual health care market. Absent the Stopgap Measure, APTCs are expected to soar from $194 million in 2017 to $350 to $500 million in 2018. Specifically, Iowa’s Stopgap Measure would include the following:
Standard Plan. Any insurance carrier in the Iowa individual market would provide a single, standard health benefits plan meeting the silver tier requirements of the ACA. This means that the plan would cover 68 to 72 percent of an insured’s costs. These plans would offer all ACA essential health benefits, including preventive services with no cost sharing. The plans would be guaranteed issue, meaning that qualified Iowans could not be turned away, and the plans would not have annual or lifetime health benefit limits. Individuals would purchase these plans directly from participating carriers, not through the current ACA online Marketplace. Enrollment would be available from November 1, 2017 through December 15, 2017, and during special enrollment periods, such as upon the birth of a baby.
Premium Credits. Individuals purchasing these plans would be allotted a flat monthly premium credit that would be paid directly to the carrier to lower the cost of the individual’s premium, which could be based upon age and rating area. These payments would not be payments to the individual, but funds paid directly to the insurer. A third-party vendor would be enlisted to calculate the amount of the premium credit allocated to each individual based upon age and income. Proof of income would be required at enrollment. The individual would be billed for the balance of the premium, after the premium credit is subtracted. Page 15 of the proposal offers example tables of how these credits might work. The rates reflected in these tables, however, are not final or approved.
Reinsurance. Iowa would also use a portion of its federal funding to supplement its existing reinsurance program in the attempt to lower the required premiums for these individual plans. This reinsurance program would reimburse carriers for the cost of individual insureds incurring more than $100,000 in claims during a coverage year. Specifically, the program (in conjunction with the Federal High-Cost Risk Pooling Program) would offer 85 percent coinsurance for claims between $100,000 and $3,000,000. It would then offer 100 percent coinsurance protection for claims above $ 3,000,000.
The total APTC and CSR funding allocated to Iowa would be divided between the premium credits and the reinsurance program. The program would be effective immediately upon CMS approval. Iowa is asking to renew this emergency option through 2019. Iowa’s Stopgap Measure is seeking relief from strict compliance with section 1332 because, according to the proposal, all of the provision’s requirements cannot be met in the timeframe required to save “Iowa’s market collapse.”
The IID will hold its last of three informational meetings on this proposal on August 10, 2017, in Cedar Rapids. Written public comments are being accepted through August 14. It is unclear when CMS (and the other agencies) will make a decision on the request. The regulations provide only that the final decision will be issued no later than 180 days after the determination that an application is complete.
A Final Thought
Last month, the Senate tried and failed to pass a bill that would repeal portions of the Affordable Care Act. It should be noted that none of the provisions in that bill, or in the bill passed by the House in May, addressed this immediate problem facing Iowans in the individual healthcare market. Instead, the focus of the Senate Bill was to repeal the mandates requiring individuals to buy insurance and employers to offer it. The House Bill included, in addition to those repeals, a list of other ACA tax repeals and a restriction on Medicaid funding.
A long-term solution will be required to address the nationwide problems associated with the individual healthcare insurance market. In the meantime, we will keep you posted on the status of the Iowa Stopgap Measure. Insurance coverage for thousands of Iowans hangs in the balance.
[ii] Although they are currently being paid, the future of CSR payments is very unclear. Their constitutionality has been challenged, and the President has suggested that they may stop. The Iowa plan would use CSR payments only if they are available.
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