Behind their defiance, Idaho officials may be pressing CMS for renewable short-term plans

Idaho state officials insist that the CMS' rejection last week of their effort to let insurers sell health plans that don't comply with the Affordable Care Act's coverage mandates was not a rejection. That position has both ACA supporters and critics scratching their heads.

Observers are wondering if behind the scenes, Idaho officials are negotiating with the Trump administration to meld their proposal for cheaper, leaner individual-market plans with the administration's proposed rule to let insurers offer short-term products for up to 364 days. The key issue may be adding some form of guaranteed renewability for short-term plans.

CMS Administrator Seema Verma, in a March 8 letter to Idaho Republican Gov. Butch Otter and state Insurance Department Director Dean Cameron, said her agency has "reason to believe" the state would not be "substantially enforcing" current law by allowing the sale of proposed "state-based plans."

She warned that if Blue Cross of Idaho goes ahead with its proposal to sell plans that don't comply with the ACA, the CMS could impose fines of $100 per day per subscriber, followed by a cease-and-desist order.

But Otter and Cameron said Verma's letter was not a rejection of the state's approach for providing more affordable health insurance options, and that they viewed the letter as an invitation to continue discussing their proposed state-based plans.

That befuddled most observers. "I'm at a loss to explain Idaho's thought process at this point," said Eliot Fishman, senior director of health policy at the liberal Families USA and a former CMS Medicaid official in the Obama administration. "Verma's letter was a pretty direct and public statement. It's not clear they have anywhere to go with this."

"This administration said, 'We'll enforce the law, and if the proposal doesn't meet these parts of the ACA, you can't do it,'?" said Christopher Condeluci, a Republican healthcare lobbyist and former Senate staffer.

Cameron did not respond to a request for comment Monday. He previously has said the state-based plans were needed to stop the rapid loss of healthier people from his state's individual market due to unaffordable prices for ACA marketplace plans.

Jan Dubauskas, general counsel for Health eDeals, a division of IHC Group that is a leading seller of short-term plans in Idaho and other states, said that based on her meeting with Cameron last week, he and Otter want the CMS to make short-term plans look more like standard plans.

Specifically, the Idaho officials are pressing the CMS to make short-term plans automatically renewable after the initial proposed 364-day period, she said. That would mean consumers could buy a plan for 364 days with the option to renew it without medical underwriting or exclusions for any medical conditions they developed during the initial 364 days.

In addition, Dubauskas said Cameron wants short-term plans to include enhanced benefits that are more comparable to the ACA's essential benefits package, notably maternity coverage.

Under Idaho's proposed model, insurers would have been able to sell plans with 50% higher premiums for people with pre-existing conditions; exclude coverage for pre-existing conditions for people who had a gap in coverage; vary premiums by 5-to-1 based on age; exclude coverage for some ACA essential benefits such as maternity care; and set a $1 million annual cap on benefits. All these features are prohibited by the ACA.

Last month, Blue Cross of Idaho announced that starting in April it would sell five individual-market plans, which it dubbed Freedom plans, under the state-based plan model. It estimated there were about 110,000 middle-class, uninsured Idahoans who might be interested in buying these plans. Other insurers selling plans in Idaho held back, expressing wariness about violating the ACA's coverage rules.

In a January interview, Cameron expressed concern about the short-term plans that currently are offered, warning that they divide healthier and sicker people into separate risk pools and contribute to the disintegration of the ACA-compliant market.

Dubauskas said her company would be willing to offer some form of guaranteed renewability. But she added that her company would have to adjust the initial premium upward to reflect its increased risk in insuring a customer for two 364-day periods instead of one without a fresh evaluation of the customer's health status.

"This is new territory," she acknowledged. Charging a higher initial premium "could make the plan attractive for all parties."

A Blue Cross of Idaho spokesman declined to say whether it would be interested in expanding those plans and making them guaranteed renewable.

But experts say it would be legally dubious for the Trump administration to issue a rule allowing guaranteed renewability for short-term plans, and that congressional action likely would be needed for that. Democrats likely would block such legislation in the Senate.

"The more you make a short-term plan look like conventional health insurance, the shakier becomes the legal case for the administration's rule allowing short-term plans for up to 364 days," said Nicholas Bagley, a University of Michigan law professor who's an ACA expert.

The ACA carved out an exception from its coverage rules for short-term plans. "But you can't define those words short-term out of the statute," he added.

Fishman noted that the Trump administration implicitly recognized that making short-term plans renewable on a guaranteed basis would not comply with the ACA. The White House recently urged congressional action to make more affordable coverage available by "clarifying" that short-term plans may offer renewals without using medical underwriting.

In addition, Sen. John Barrasso (R-Wyo.) recently introduced a bill to define short-term plans as lasting up to 364 days and making such plans guaranteed renewable at the option of the applicant.