With consumers facing higher premiums in the individual market this year, demand has increased nationally for cheaper, short-term health plans that don't have to comply with Affordable Care Act rules.
But one organization in Tennessee is selling full-year policies that dispense with a cornerstone of the law — its ban on insurers considering customers' pre-existing medical conditions in deciding whether and how to cover them.
Whether insurers will continue to be barred from evaluating their potential customers' medical status is a main question surrounding Republican efforts to repeal and replace Obamacare. The type of plans sold by Columbia, Tenn.-based Farm Bureau Health Plans may foreshadow the products allowed by the GOP replacement plan.
House Speaker Paul Ryan and other GOP leaders have indicated they want to deregulate health insurance, including letting insurers screen for medical conditions if consumers don't maintain continuous coverage. President-elect Donald Trump, however, has said he wants to keep the ACA's ban on discrimination against people with pre-existing conditions though he's offered no other details.
Some insurers have been happy to accommodate the demand for cheaper, skimpier plans by selling short-term products that can run for up to 364 days and don't have to meet ACA rules. In October, however, the HHS issued a final rule limiting the duration of short-term plans to three months and barring insurers from renewing them, effective in 2017. It remains to be seen whether the incoming Trump administration will move to reverse that in response to lobbying pressure from insurers.
Given these cat-and-mouse games, my interest was piqued by a recent news article about Farm Bureau Health Plan, which sells full-year individual-market plans to Tennesseans willing to submit to medical underwriting. I was surprised because I thought the ACA had ended that type of review of applicants' medical histories in full-year, comprehensive health plans. Two experts I contacted said they are not aware of any other health plans like this.
The Farm Bureau Health Plan had received 3,000 applications by mid-December for its “traditional,” non-ACA compliant plan, up from 300 the year before, according to the Nashville news article.
The plan does not offer the full range of essential benefits required by the ACA. But it features a broader provider network than other individual-market plans in Tennessee, no annual or lifetime benefit limits, and lower premiums and deductibles than ACA-compliant plans, said Ryan Brown, general counsel for the company. On the other hand, plan members must pay the Obamacare tax penalty for not having ACA-compliant coverage, which is 2.5% of adjusted gross income or $695 per adult, whichever is greater.
His company also sells ACA-compliant plans, for which rates increased more than 30% for 2017. Even so, Brown said demand for those plans also has increased sharply, largely because BlueCross BlueShield of Tennessee stopped selling individual plans in several large markets, and UnitedHealthGroup withdrew from the state entirely. Farm Bureau has received 15,000 to 20,000 applications for ACA-compliant plans for 2017. In all, the organization provides health insurance to 175,000 people.
Farm Bureau reviews applicants' medical histories before selling them plans, but does not repeat that review when they renew. It will exclude certain pre-existing conditions or it could refuse to cover the person entirely or at all.
"The premium differences can be enough to where it causes someone to want to have that coverage and go through the underwriting process rather than go through an ACA plan,” Brown said. “It's an option for some people.”
Farm Bureau Health Plan is apparently an anomaly. Brown said his organization is allowed by the state to sell non-compliant plans because it's a not-for-profit membership services organization providing services to the members of the Tennessee Farm Bureau Federation, which was created in 1947. Under a state law passed in 1993, he said, it's considered an organization that creates programs for rural health, not a licensed health insurer subject to Tennessee statute and therefore not subject to ACA rules.
Kevin Walters, a spokesman for the Tennessee Department of Commerce & Insurance, said Farm Bureau is not subject to his department's regulation. It's the only medically underwritten plan in the state, he said.
“What makes these plans cheaper is they're able to deny sick people,” said Sabrina Corlette, a health insurance expert at Georgetown University. “While that may be a good deal if you're healthy, it just means everyone who has a pre-existing condition and can't get one of those plans has to pay a higher premium.”
Brown said only the 650,000 members of the Tennessee Farm Bureau Federation can buy his organization's health plans. But you don't have to work in agriculture to become a dues-paying member of the federation, he added.
The news article last week identified Knoxville daycare center owner April Bean as one applicant for coverage under the Farm Bureau's medically underwritten traditional plan. To save $150 a month on her premium, she switched to a Humana plan for 2017 with a deductible of $9,000, up from the $5,000 deductible she had before. But she's also applied for a cheaper Farm Bureau plan, with a deductible of about $2,000. She was waiting to hear back from Farm Bureau on whether the company would accept her and her 9-year-old son after reviewing their medical histories.
People who buy health plans lacking the ACA's protections such as the medical underwriting ban and minimum essential benefits such as maternity care, coverage of prescription drugs and mental health/addiction services, are taking a big chance, said Michele Johnson, executive director of the Tennessee Justice Center, a Nashville-based consumer advocacy group. She didn't previously know Farm Bureau sells non-compliant plans.
“People may want a cheaper option like this, until they need coverage,” said Johnson, who has seen insured Tennesseans face bankruptcy because their plan didn't adequately cover serious illnesses. “Then they really wish they'd been better informed when they bought their plan.”
Correction: February 19, 2017
This story has been revised to correctly identify Kevin Walters as a spokesman for the Tennessee Department of Commerce & Insurance.
