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Research & Commentary: Iowa Makes Way for Affordable Health Care

March 2, 2018

Proposals in Iowa would allow organizations to offer cheap health benefit plans to their members.

stethoscope and insurance docs

The Patient Protection and Affordable Care Act (ACA), colloquially known as “Obamacare,” has caused many health insurers to stop offering policies in health insurance marketplaces due to significantly financial losses associated with operating in an Obamacare exchange. This has resulted in decreased competition and, subsequently, steep increases in monthly health insurance premiums.

Iowa is one of 10 states that are without marketplace competition. After three major health insurers bailed in 2017, Medica is now the last insurer standing in Iowa’s ACA insurance marketplace. The collapse of the state’s insurance market has priced out nearly all individuals who do not qualify for federal subsidies to pay for the plans, according to the Iowa Insurance Division. Of the 46,563 Iowans covered under ACA-compliant policies, about 90 percent of them (41,742) receive federal subsidies.

Iowa Insurance Commissioner Doug Ommen recently stated, “Overall, we expected roughly 20,000 Iowans to flee the ACA individual health insurance market in 2018 due to skyrocketing costs. Unfortunately, it appears even more Iowans than we anticipated have left the individual market. … I continue to call on Congress to fix this federal problem.”

Instead of waiting on congressional relief, Iowa lawmakers are considering allowing nonprofit agricultural organizations to offer their dues-paying members health benefit plans that would not be deemed as “insurance,” and therefore not subject to federal and state regulations. These health plans would need to be administered by a third-party health care organization. Proposals in the Iowa House and Senate would expand health care plan options and bring down their costs to levels that are affordable for many self-employed farmers who are not eligible for government subsidies or programs.

Wellmark Blue Cross and Blue Shield, Iowa’s largest health insurance provider, is in talk with the Iowa Farm Bureau Federation, the state’s largest grassroots farm organization, about administering health plans to its members. The organization estimates about 150,000 Iowans, mainly farmers, are current members, and anyone can join for just $55 or less per year in annual dues. And with the repeal of the individual mandate, members will not be penalized for not purchasing non-ACA compliant health insurance plans.

Because these plans would not have to comply with costly regulations, such as mandated essential health benefits, pre-existing conditions coverage, and caps on claims, they will attract middle-income families and healthy and/or young individuals who desperately need options that are cheaper than the ACA-compliant insurance plans.

States pushing ahead to offer affordable health care plans are doing so at just the right time. The Kaiser Family Foundation analyzed 2018 marketplace premium rates and found consumers across the country are facing significantly higher rates this year. According to the data, a 40-year-old Iowan who is not eligible for a monthly premium subsidy faces a 47–171 percent rate increase in ACA Silver insurance plans, depending on his or her county of residence. Neither switching to the bronze nor gold plan offers any financial relief. Bronze premiums increased by 36–162 percent and Gold Plan premiums rose by 31–53 percent.

Iowa’s proposals would result in a model similar to what already exists in Tennessee. The Farm Bureau chapter in Tennessee offers medically-underwritten health benefit plans that are not subject to costly federal or state regulations. These insurers are able to circumvent existing regulations because the plans are technically not health insurance under state law.

Similarly, Idaho Gov. Butch Otter (R) recently signed an executive order that gives Blue Cross of Idaho the green light to offer “state-based” health plans that are not compliant with the ACA.

The Hawkeye State can do more to reform its health care system beyond these two bill proposals. If approved by the state legislature and the U.S. Health and Human Services secretary, 1332 waivers could be used to reform ACA by ending the employer mandate, redefining essential health benefits, and adopting health savings accounts, among other fixes. In addition to taking advantage of state waivers, lawmakers can get rid of harsh restrictions in their state by repealing community rating laws and guaranteed-issue laws, certificate of need mandates, and unnecessary licensing standards.

 

The following documents provide more information on health care reform:

Don’t Wait for Congress to Fix Health Care
https://www.heartland.org/_template-assets/documents/policy-documents/Glans%20State%20Health%20Care%20Solutions.pdf
Heartland Senior Policy Analyst Matthew Glans explores solutions states have taken and can take in the future to help solve problems created by Obamacare and Medicaid without needing the federal government.

2018 Obamacare Health Insurance Exchanges: Competition and Choice Shrink
https://www.heritage.org/health-care-reform/report/2018-obamacare-health-insurance-exchanges-competition-and-choice-continue
Senior Research Fellow for The Heritage Foundation Edmund Haislmaier examines the number of insurers left offering individual health insurance plans and the effect of non-competitive ACA marketplaces.

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

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/
This Issue Brief from 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.

Iowa Submits Sweeping 1332 Waiver Seeking Emergency Relief
https://www.manatt.com/Insights/Newsletters/Manatt-on-1332/Iowa-Submits-Sweeping-1332-Waiver-Seeking-Emergenc
Joel S. Ario, Chiquita Brooks-LaSure, and Adam M. Finkelstein of Manatt, a national consulting firm, examine the current details of Iowa’s Stopgap Measure 1332 waiver and the changes it proposes.

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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 Arianna Wilkerson, a state government relations coordinator at The Heartland Institute, at awilkerson@heartland.org or 312/377-4000.

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Arianna Wilkerson works in government relations at The Heartland Institute.
awilkerson@heartland.org