Iowa, Tennessee Farm Bureau plans offer states a blueprint for avoiding ACA rules
Other Republican-led states may follow Iowa and Tennessee in allowing cheaper, leaner health plans that don't comply with Affordable Care Act rules, even though such plans could create problems in those states' individual insurance markets, experts say.
But these alternative plans may find themselves in a race to the bottom as they are forced to compete with even cheaper, skimpier short-term products that the Trump administration has proposed to expand. They may have to cut benefits and adopt tougher medical underwriting practices, looking more and more like so-called junk insurance, to avoid getting stuck with sicker, costlier patients.
Iowa Republican Gov. Kim Reynolds signed a bill this week that does an end run around ACA consumer protection rules. The stated goal is to make cheaper plans available to Iowans who make too much money to qualify for ACA premium subsidies.
The law allows the Iowa Farm Bureau to partner with Wellmark Blue Cross and Blue Shield in selling so-called health benefit plans, which won't have to comply with ACA rules requiring essential benefits, barring medical underwriting, and prohibiting annual or lifetime benefit limits.
"Because of this bill, thousands of Iowans will now have affordable healthcare coverage," Reynolds said.
The bill gets around the ACA by defining the new type of plans as not being health insurance and therefore not subject to state regulation as health insurance. That's similar to an arrangement in Tennessee that has allowed the Tennessee Farm Bureau to sell unregulated health plans dating back to 1993.
Sales of the "traditional" health plans have swelled to about 22,000 membership contracts currently, up from 3,000 a year ago, according to Ryan Brown, senior vice president of health plan administration for Farm Bureau Health Plans.
The Farm Bureau plan approach offers GOP state leaders a new path around the ACA. In January, Idaho Republican officials proposed allowing Blue Cross of Idaho to sell cheaper, leaner plans that didn't meet ACA standards. But the CMS blocked that effort last month, saying the plans did not comply with the law. Idaho officials say their discussions with the CMS are continuing.
The Obama administration took no action to halt the sales of Tennessee Farm Bureau plans, and it's not expected that the Trump administration will try to block sales of Iowa Farm Bureau plans. The ACA rules only apply to products that are officially deemed health insurance. Some experts are baffled by how the law's provisions can be skirted by defining these plans as not being health insurance.
Along similar lines, Minnesota passed a law last year allowing self-insured "agricultural cooperative health plans" for farmers that don't have to meet ACA requirements.
The American Farm Bureau Federation said it was not aware of any other state Farm Bureau that has proposed to offer unregulated individual-market plans like those in Iowa and Tennessee. A Blue Cross of Idaho spokesman said that approach would require new legislation, and he hasn't heard of any proposals like that so far.
But Christopher Condeluci, a Republican healthcare lobbyist and former U.S. Senate staffer, said it seems "logical" that governors and lawmakers in Republican-led states would pursue this approach, either through their state Farm Bureau or similar broad membership organizations.
"They could or should be saying to themselves, 'Hey, Iowa's approach seemed to work, why don't we try to do the same thing?' " said Condeluci, who already has suggested the idea to GOP officials in Maine.
But such plans likely would destabilize the ACA market by siphoning healthier people away from ACA-compliant plans and driving up premiums even more, said Sabrina Corlette, a research professor at Georgetown University's Health Policy Institute. That could make it less likely that insurers will offer ACA-compliant plans either on or off the exchange.
State officials, however, may be reluctant to allow health plans over which they have no regulatory control, as Iowa and Tennessee have done.
"You have a state voluntarily abdicating its own authority over its insurance market," Corlette said. "That's a bit of a head-scratcher. I don't know that other states will rush to do that."
Another question mark is how the new Farm Bureau plans in Iowa will affect Wellmark's announced plan to resume selling ACA-compliant exchange plans in 2019. Iowa's ACA market has struggled, in part because more than half of all enrollees are in plans that don't comply with the ACA, skewing the ACA risk pool toward sicker people. Medica, currently the state's sole exchange carrier, hiked premiums 57% for 2018. That company strongly opposed the new Farm Bureau plan bill as unfair competition
A Wellmark spokeswoman said her company will offer ACA-compliant exchange plans in 2019 in all 99 Iowa counties "assuming there aren't any significant changes to the ACA." She added that Wellmark believes its ACA plans "can co-exist" with the new Farm Bureau plans.
It's expected that tens of thousands of healthier Iowans in Wellmark's existing plans that don't comply with the ACA will shift to the Iowa Farm Bureau plan, which Wellmark will administer. That could enable the not-for-profit insurer to then show a sicker-than-average enrollment pool in its ACA plans and pocket ACA risk-pool payments, Corlette said.
"The existence of a parallel market that can screen out unhealthy people creates incentives for companies to shift their currently healthy enrollment to that pool," she said. "They could end up winning in the risk-adjustment game."
In Tennessee, Farm Bureau Health Plans stopped offering ACA exchange plans this year because it was losing money on them, due in part to very sick members receiving care at Vanderbilt University Medical Center, which was a network provider, Brown said. For 2018, about a third of the 25,000 people in the Farm Bureau's ACA plans switched to the company's traditional plans, which screen applicants for pre-existing conditions on a one-time-only basis.
"We've seen a substantial increase in the last year or so," he said. "Policymakers have different opinions about whether our traditional plans are good or bad for that market, but people are enrolling because they feel they are getting a good benefit for a good price."
Brown expressed concern that if the Trump administration expands the availability of short-term plans by extending their duration from 30 days to 364 days, that could attract the healthiest consumers and leave Farm Bureau and other plans with sicker members.
Still, he doubts that his company's traditional plans have hurt Tennessee's struggling ACA market, because enrollment in those plans is relatively small compared with the size of the total ACA market, which has more than 200,000 enrollees.
Corlette is not so sure about that. She warns that the existence of the Farm Bureau plans in Tennessee and Iowa, combined with the potential availability of cheaper short-term plans lasting 364-days rather than 30, could have a major negative impact on the overall individual market.
"Those plans can market themselves to walk and talk like classic health insurance, and a lot of healthy consumers will gravitate to that," she said. "That leaves sicker folks in the ACA market."
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