With reports that insurance premiums for policies purchased in Affordable Care Act (ACA) marketplaces will rise as much as 30 percent in 2019, states are looking at innovative ways to help residents keep health insurance costs low while keeping their coverage. States like Iowa and Tennessee have discovered loopholes in the ACA that may allow them to lower premiums when other states are facing double-digit increases.
Iowa Health Benefit Plan
In early April, Iowa Governor Kim Reynolds signed a bill that would allow Iowa residents to purchase health benefit plans that are sponsored by the Iowa Farm Bureau. The legislation was a collaboration between the state’s largest insurer to sell health benefit plans to consumers. The policies can’t be called insurance as they aren’t regulated, and they do not have to comply with mandated ACA rules. Because they aren’t required to provide the essential health benefits all major medical policies issued under the ACA must carry, premiums are lower. Opponents of the measure claim that the new plans, which were created under a loophole in the ACA, will place further stress on the market and could lead to substandard coverage. Those who support the idea say that it could provide affordable coverage to consumers who have dropped out of the marketplace due to skyrocketing premiums.
Tennessee Led the Way
Since 1993, the Tennessee Farm Bureau has been permitted to offer health plans to members, a fact that the Volunteer State took advantage of when Obamacare became law. The state allows the Farm Bureau to market and sell the plans to anyone who applies for membership and passes screenings for high-cost medical conditions. These plans don’t count as minimum essential coverage and are subject to the individual mandate penalty until it goes away next year. Despite this deterrent, Farm Bureau plans in Tennessee saw enrollment grow to more than 73,000 people, with 23,000 of those enrollments occurring after the ACA passed. After Obamacare’s passage, Tennessee could have required Farm Bureau plans to follow the same rules as other insurance companies but chose not to do so. The Obama administration never challenged the policies as unlawful.
CMS Denies Idaho Plan
In January 2018, Idaho Governor C.L. “Butch” Otter issued an executive order that allowed the Department of Insurance to approve plans that met state standards even if they did not meet ACA standards. The governor cited the Trump administration’s support of state-based solutions as the reason for his order. Under the order, Idaho would allow carriers to sell insurance plans that capped annual medical spending and for plans to be varied based on health history or status. Plans would also not be required to provide the essential health benefits mandated under the ACA. Insurers would have to offer an ACA-compliant plan through the marketplace in order to offer a non-compliant plan.
However, on March 8, CMS informed Governor Otter that the state couldn’t violate the ACA law in the manner they proposed. Instead, CMS provided Idaho with a path that the state could follow that would allow for health plans similar to those created by Tennessee and Iowa. Experts indicated that the CMS response provided detailed information for any state that wanted to circumvent the requirements of the ACA.
New Regulations
In early April, the Trump administration released new regulations that could provide more flexibility at the state level. Some of the new regulations ease the requirements on what health plans must cover while others assist with quality control. Under the new regulations, starting in 2020, states may choose a benchmark plan from another state instead of requiring the state to only choose benchmark plans within the state. The 10 essential health benefits are still required, but states can choose less restrictive policies from another state than that offered by insurers in their state.
States could also make changes to insurers’ medical loss ratios. Currently, the ACA requires that an insurer spends 80 percent of the money it collects in premiums on claims and only 20 percent on administration or marketing. The new rules also govern the plans that insurers can provide in 2019, giving insurance companies until June to decide if they want to remain in the marketplace.
Critics of the New Regulations
Democrats in Congress criticize the new regulations as a way to get around the ACA’s patient protections. Some claim that the new rules will create plans that provide less coverage and allow insurance companies to deny coverage to people with pre-existing conditions. There are also reports that the changes could actually lead to higher insurance premiums and even more insurance companies leaving the marketplace.
Although Republicans in Congress have been unsuccessful in repealing and replacing the ACA, changes to the law – including the elimination of the individual mandate, approval of health plans that don’t meet the requirements of the ACA and the cancellation of subsidies to insurance companies – have affected Obamacare in substantial ways. Premiums are expected to rise for 2019 by as much as 30 percent, which could drive marketplace enrollees away as more insurers consider dropping out of the exchanges.
