Iowa withdraws request to establish alternative insurance model

Frustrated by the Trump administration's slow response, Iowa's Republican leaders have withdrawn their ambitious proposal to establish an alternative individual health insurance system to replace the Affordable Care Act's exchange marketplace.

State officials said the controversial changes proposed under their ACA Section 1332 state innovation waiver were necessary to make premiums more affordable for Iowans of all income levels and dissuade them from dropping insurance. That, they argued, would stabilize the market and reduce premiums by keeping healthier people in the risk pool to offset the costs of sicker people.

Otherwise, nearly 20,000 mostly healthy Iowans out of the 72,000 people currently in the ACA-regulated individual market were likely to drop coverage, which would drive premiums even higher, they warned.

But state leaders decided Monday that with 2018 open enrollment for the individual market starting Nov. 1, they couldn't wait any longer for the CMS to approve their so-called stop-gap measure. They had received mixed signals from the CMS, with President Donald Trump reportedly pressing the agency personally to reject it.

"Obamacare is an unworkable law," Doug Ommen, Iowa's Republican-appointed insurance commissioner, said in a written statement. "The Stopgap Measure was an innovative solution to help thousands of Iowans. Unfortunately, Obamacare's waiver rules are so inflexible that the stopgap cannot be approved under terms that would be workable for Iowa."

In addition, the plan may have fallen victim to Trump's recent decision to halt cost-sharing reduction payments to insurers. The state originally was counting on those funds to help finance its alternative coverage system, said Keith Mueller, interim dean of the University of Iowa College of Public Health.

It was widely expected that if the Trump administration approved Iowa's 1332 waiver request, other states soon would follow with similar proposals. That could enable them to sidestep some of the ACA's consumer protections that congressional Republicans have been trying to loosen or eliminate in their repeal-and-replace bills and that Trump proposed to relax in his recent executive order.

As it stands now, Minnesota-based Medica will be the only insurer to sell ACA-compliant health plans in every county in Iowa for 2018. It has proposed to raise its rates by 57% over its 2017 premiums. Wellmark Blue Cross and Blue Shield had said it would reverse its decision to exit Iowa's exchange market in 2018 if the waiver were approved.

Medica said it would have preferred for the state and the CMS to have gone ahead with the stopgap plan but that it would proceed to offer plans in all Iowa counties for 2018. "While this is not the preferred outcome for the state of Iowa, we want consumers to know that Medica is ready," the insurer said.

Under the stopgap measure first proposed in June, Iowa residents would have received premium subsidies based on broad age and income categories, without using the Affordable Care Act's calculation to cap premium costs at a certain percentage of a person's income. The state revenue department would determine a person's eligibility and level of subsidy, rather than having that determination made by the federal exchange.

Another change was that people earning more than 400% of the federal poverty level would be eligible for premium subsidies. Meanwhile, people with incomes between 200% and 250% of poverty would no longer receive cost-sharing subsidies to reduce their deductible and coinsurance payments.

The state proposed to replace the variety of ACA-compliant plans featuring different deductible and cost-sharing levels with one standard plan carrying a $7,350 per-person deductible, along with fixed-dollar copayments for various services.

The state would have used a portion of the federal subsidy money to set up a reinsurance program to protect insurers that sign up high-cost enrollees.

Iowa officials had insisted they were capable of quickly establishing a state infrastructure to determine eligibility and sign people up for coverage, in time for the Nov. 1 open enrollment. But many outside observers had sharp doubts.

"Iowa said it had been doing stuff behind the scenes to build their own system for people to see their plan choices and subsidies, apply and get enrolled," said Karen Pollitz, a senior fellow at the Kaiser Family Foundation. "But it took other states four years to build their own exchange websites."

Consumer advocates also warned that eliminating the cost-sharing reductions for some low-income people would make healthcare unaffordable for those people, particularly given the $7,350 standard deductible.

Those cost-sharing levels would test the ACA's so-called guardrails requiring that alternative state models under Section 1332 offer plans that are at least as comprehensive and affordable as those available under the standard ACA framework, Pollitz said.

Part of the problem for Iowa and the CMS in deciding whether to go ahead with the waiver plan was that it originally was based on the state receiving cost-sharing reduction payments. But Trump's decision to halt funding for those payments, along with Congress' failure to act so far to continue the funding, meant that Iowa could not count on having those funds available to finance its alternative coverage system.

An Oct. 19 letter from HHS to the Iowa Insurance Division cautioned Iowa officials that HHS would require as a condition of approval that the state ensure sufficient funds were available for the waiver plan to operate as proposed.

"CMS was asking the state, 'Do you have enough revenue without the CSR funds to make this work?' " Mueller said.