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Iowa Leads The Nation In Embracing Association Health Plans and Short-Term Insurance

September 13, 2018

In this Research & Commentary, Charlie Katebi examines new reforms in Iowa that will expand access to affordable and reliable health insurance.

Since taking office, the Trump administration has implemented a series of regulations to expand health care access and reduce costs. So far, the administration has introduced two types of affordable health insurance options: association health plans and short-term, limited-duration health insurance plans.

Unfortunately, some states have prevented consumers from purchasing these innovative health plans. However, Iowa lawmakers have embraced the administration’s reforms. Therefore, the Hawkeye State can serve as a model for state lawmakers that want to increase health insurance choices.

On September 6, the Iowa Insurance Division released rules to allow individuals to access association health plans and short-term insurance. The rule changes will permit multiple employers and civic associations to pool their members and offer health insurance as a large group. This will enable small businesses to spread their employees’ health care costs over a larger pool, which will reduce the premiums each individual worker must pay. Groups that pool their members are able to negotiate more effectively with providers. In fact, employers and other groups who form an association plan will be able to offer coverage that is nearly $3,000 less than if they remain as a small group, according to the consulting firm Avalere Health.

Furthermore, the Hawkeye State’s rules for short-term health insurance will similarly expand affordable coverage in the individual insurance market. Short-term plans are one of the few types of coverage insurers can sell that are exempt from Obamacare’s community rating and essential health benefits mandates, which dramatically increase premiums. According to experts at McKinsey & Company, these mandates are responsible for 75 percent of the premium increases since 2013.

Because short-term insurance is exempt from these expensive regulations, they provide significantly more affordable coverage than Obamacare. An August 2018 report from eHealth found that the least costly short-term plan in Des Moines, Iowa would cost a 25-year-old individual just $43 in monthly premiums compared to $418 for Obamacare’s Bronze Plan—the least expensive option on the Obamacare exchange.

Iowa’s reforms will greatly expand the availability of short-term coverage in several ways. They will increase the duration of time insurers can offer short-term contracts from 90 days to 264 days and allow individuals to renew them for up to 36 months. In addition, they will allow consumers to combine these plans with a product known as a “renewal guarantee” that will protect them from premium increases if they get sick.

The Hawkeye’s State’s measures show how states can make health care more affordable and reliable for families. The report from eHealth demonstrates that short-term plans cost 86 percent less for a family of three than the least expensive insurance plans available on Obamacare’s federal and state exchanges. After years of exploding premiums and declining choices, lawmakers finally have the opportunity to bring health care relief to their states.

 

The following documents provide more information about free-market health insurance reforms:

Trump Executive Order Could Save Millions from Obamacare
https://www.cato.org/blog/trump-executive-order-could-save-millions-obamacare
Michael Cannon, director of health policy studies at the Cato Institute, examines President Donald Trump’s executive order expanding affordable health insurance options for consumers. “President Trump today signed an executive order that urges executive-branch agencies to take steps that could free millions of consumers from Obamacare’s hidden taxes, bring transparency to that law, and give hundreds of millions of workers greater control over their earnings and health care decisions,” said Cannon.

Trump Administration Restores an Escape Valve From Obamacare’s Insurance Regulations
https://www.forbes.com/sites/theapothecary/2018/02/22/trump-administration-restores-an-escape-valve-from-obamacares-insurance-regulations/#63f216bc3223
Avik Roy, president of the Foundation for Research on Equal Opportunity, examines in this Forbes article new regulations introduced by the Department of Health and Human Services that will deregulate short-term, limited-duration health insurance. “The Trump administration has now proposed new rules under which these affordable STDL plans would once again be available to those who want them, for up to 364 days,” Roy wrote.

How Trump Is Bringing More Affordable Insurance for Small Businesses
https://www.forbes.com/sites/theapothecary/2018/03/08/how-trump-is-bringing-more-affordable-insurance-for-small-businesses/#1ad1fc9748e9
Josh Archambault, senior fellow on health care policy at the Pioneer Institute, examines new regulations to allow small businesses to enroll workers in association health plans. “Small employers have seen significant health insurance premium inflation since the passage of the Affordable Care Act, combined with restricted choice of plans to offer their workers—AHPs could provide valuable new options for coverage and encourage more small firms to provide health coverage to their employees,” wrote Archambault.

Premium Reconciliation and Pre-ACA Deep Dive
https://www.ronjohnson.senate.gov/public/_cache/files/2c915f24-f868-4207-85ed-4d0d319c45e8/johnson-and-lee-dear-colleague-july-19a.pdf
McKinsey & Company analyzes the impact of Obamacare insurance regulations on the premiums of individuals of various ages. “Obamacare mandates related to pre-existing conditions, including guaranteed issue (the requirement that insurers issue plans to any applicant) and community rating (the requirement that insurers charge the same premium to individuals regardless of health status, use of services, etc.), were the chief drivers of premium increases in the markets analyzed. The analysis shows that these mandates, along with other risk factors, have been responsible for 41 percent to 76 percent of the premium increases in the markets analyzed,” wrote McKinsey & Company.

Don’t Wait for Congress to Fix Health Care                    
https://www.heartland.org/publications.../dont-wait-for-congress-to-fix-health-care
Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs, or submit even more ambitious requests for waivers to the Department of Health and Human Services—a procedure the Trump administration has encouraged.

Section 1332 State Innovation Waivers: Current Status and Potential Changes
http://www.kff.org/health-reform/issue-brief/section-1332-state-innovation-waivers-current-status-and-potential-changes/
The Kaiser Family Foundation provides an overview of Section 1332 Medicaid waivers, how they are approved and financed, how states have used them, and how they have impacted health care reform.

How Premiums Are Changing in 2018
https://www.kff.org/health-reform/issue-brief/how-premiums-are-changing-in-2018/
Kaiser Family Foundation researchers examine the premium rate increases consumers face in Obamacare marketplaces, which have occurred in large part because of the drop in insurer participation.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute’s website, contact Charlie Katebi, The Heartland Institute’s state government relations manager, at ckatebi@heartland.org or 978-855-2992.

Author
Charles Katebi is state government relations manager with the Heartland Institute
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