A new law in Iowa could provide the path forward for Republican-led states that are looking for ways around ObamaCare’s rules and regulations.
Iowa Gov. Kim Reynolds (R) on Monday signed a law that will allow the Iowa Farm Bureau to collaborate with Wellmark Blue Cross and Blue Shield on self-funded “health benefit plans.”
The plans would be cheaper than traditional ObamaCare plans because they wouldn’t be required to meet federal requirements.
“I have urged Congress to fix this problem, but … we’re done waiting,” Reynolds said at a press conference. “Because of this bill, thousands of Iowans will now have affordable health care coverage.”
Under the Affordable Care Act, all individual and small group health plans (for people who don’t have coverage through an employer) must offer 10 “essential health benefits,” including maternity care, mental health, substance abuse treatment, and coverage of pre-existing conditions.
States have searched for ways around those rules, with little success. An effort in Idaho to sell health plans that do not comply with ObamaCare was recently blocked by the Trump administration.
But experts say Iowa’s new law is legal and unlikely to draw pushback from the federal government, potentially creating a model for other states to follow.
Timothy Jost, a professor emeritus at the Washington and Lee University law school, said Iowa essentially found a loophole in ObamaCare.
Iowa’s plan is modeled after a similar one sponsored by the Tennessee Farm Bureau, which predates ObamaCare and was grandfathered into the new system when the law took effect.
The Obama administration never took action against the Farm Bureau in Tennessee, which suggests the Trump administration won’t take legal action against Iowa, either, Jost said.
The Iowa law contends that the health benefit plans offered by the Farm Bureau and Wellmark are a separate product and not actually health insurance plans.
Idaho ran afoul of the Trump administration earlier this month when it tried to declare that individual insurance plans did not have to meet ObamaCare’s requirements. The goal was to make plans cheaper, but the administration declared the effort illegal and blocked it.
"[The Affordable Care Act] remains the law and we have a duty to enforce and uphold the law," Seema Verma, the administrator of the federal Centers for Medicare and Medicaid Services (CMS), wrote in a letter to Idaho Gov. Butch Otter.
Verma and Idaho officials are still trying to work out a solution.
Unlike Idaho, which Jost said basically thumbed its nose at the law, Iowa is creating a parallel insurance market. That has sparked debate about what should qualify as health insurance and how states can deal with rising health insurance premiums.
“As long as you define something as individual insurance, it has to meet [ObamaCare’s] guidelines,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.
“As soon as a state calls an insurance product anything other than insurance, the ACA does not apply. So short term plans, Farm Bureau plans … there are loopholes to the extent states want to find them,” Corlette said.
Critics of ObamaCare say the law drives up costs, and that allowing people to purchase plans that don’t meet the law’s requirements will provide more freedom of choice.
Iowa’s ObamaCare exchange struggled last year. It has one of the lowest enrollment rates in the country, with only one insurer offering coverage. That insurer, Medica, asked for a 57-percent rate hike for next year, though Wellmark has agreed to return to the exchange in 2018.
In a statement, Medica said Iowa’s legislation is competitively unfair, and echoed critics who have said the health plans will cherry pick only the healthiest customers, poisoning the risk pool by leaving only sick people in ObamaCare.
“We understand the sense of urgency to help those struggling with the costs of insurance. But this is a hasty solution that will benefit a select few at the cost of others,” said Geoff Bartsh, Medica’s vice president of individual and family business.
“Markets don’t work when some get to play by a different set of rules. There are consequences,” Bartsh added.
Iowa is also taking advantage of a situation that was only possible because congressional Republicans repealed ObamaCare’s individual mandate last year.
Because the Farm Bureau plans lack ObamaCare’s consumer protections, they would not count as insurance under the law. Anyone enrolled in those plans would be subject to ObamaCare’s financial penalty for not having insurance.
But enforcement of the mandate will end next year, and new proposed rules from the Trump administration would make it easier for insurers to offer less than the comprehensive coverage required by ObamaCare.
The rules would allow people to buy short-term health insurance for up to 12 months, lifting restrictions from the Obama administration that limited the coverage to a maximum of three months.
The administration is also proposing to expand "association health plans," which allow small businesses or self-employed individuals to band together to buy coverage.
Critics say association plans and short-term plans are “junk,” but warn that without a financial penalty, an increasing number of GOP-led states will try to offer them, with support from the administration.
“Without a penalty, it opens the floodgates to these types of products,” Corlette said.
