Iowa is facing a crisis in its individual health insurance market. According to the Iowa Insurance commissioner, absent a fix, thousands of Iowans buying health insurance on the individual market, including many farmers, will face exorbitant 2018 premiums, realistically denying them the possibility of purchasing health care coverage.

All insurers but one have pulled out of Iowa’s individual health care market for 2018. And Medica, a Minnesota-based health care insurance provider that says it will stay, will be raising premiums by at least 43.5%. This is in addition to significant premium increases that have already occurred during the past several years. If Medica ultimately chooses to exit, about 72,000 Iowans will be left without health care insurance options.

Those 72,000 Iowans are the ones who purchase health care insurance on the Affordable Care Act individual market. And 44,000 of those currently buy government-subsidized plans through the online ACA Marketplace. These include Iowans with incomes at or below 400% of the Federal Poverty Level (FPL). If Medica remains in the individual market, federal taxpayers will fund the substantial increase in these Iowans’ premiums. An additional 28,000 Iowans purchase insurance on the individual market but do not qualify for subsidies under ACA because their income is above 400% of the FPL.

Why stopgap measure needed
This means that an individual earning $47,000 a year (less than 400% FPL) qualifies for subsidized coverage with an unlimited cap, but an individual earning $48,600 a year (greater than 400% FPL) does not. Unless a stopgap measure is implemented, a young family of four making $100,000 a year will be faced with $24,820-per-year insurance premiums in 2018 if they buy insurance on the individual market. Yet, if they earned just $3,000 less, they would fall within 400% of the FPL, they would qualify for subsidized coverage, and the maximum they would be required to pay for coverage would be $9,500 per year.

Married 55-year-old self-employed individuals with $66,000 in income would face an estimated $29,130 yearly premium in 2018. Yet, if they earned just $2,000 less, they would qualify for subsidized coverage, and their maximum yearly premium would be $6,200.

This immediate problem impacts Iowans purchasing insurance on the ACA-compliant individual market. This includes those who don’t have insurance through their employer, the government (i.e., Medicaid or Medicare), or a special “grandfathered” or “grandmothered” plan. This includes young people aging out of their parents’ insurance plans, retirees who are not yet eligible for Medicare, and the self-employed, including many farmers. And the problem could grow much worse.

Many insurance plans in jeopardy
About 85,000 current insurance plans are hanging by a thread, so to speak. Some of these are non-ACA-compliant grandfathered plans, those purchased on the individual health care market before 2010. The ACA allows those plans to continue only as long as the insurer does not change the plan and as long as the insured pays the premium. If the insured leaves such a plan, he or she can only purchase an ACA-compliant plan. No new insureds can join these pools.

Wellmark Blue Cross and Blue Shield has continued and will continue to offer the majority of grandfathered plans in 2018. The others are non-ACA-compliant transitional (grandmothered) plans issued from 2010 to 2013. The future of grandmothered plans is perhaps even more tenuous. They have been allowed to remain only through a yearly extension offered by the Centers for Medicare and Medicaid Services, but they will end entirely after December 2018, absent a change in the law.

Iowa’s stopgap measure proposal
In an attempt to temporarily stabilize the individual health care market for 2018 and allow all Iowans an option for purchasing health care coverage, the Iowa Insurance Division (IID) has requested emergency regulatory relief from the Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Health and Human Services, and the U.S. Department of Treasury. Called the Iowa Stopgap Measure, the IID’s formal “state innovation waiver” request was initially made in June, pursuant to Section 1332 of the ACA. At this time, no insurer had agreed to offer ACA-compliant plans in Iowa's individual health care market. The current draft dated July 13, 2017, followed Medica's filing of rates for plans to be sold in all 99 Iowa counties.

Section 1332 allows states to pursue “innovative strategies  to  provide  their residents  with  access  to high-quality, affordable health coverage.” In reality, these waivers are requested to place faltering individual markets on life support. The states can request permission to use federal money that would otherwise fund advanced premium tax credits or cost-sharing reductions in other ways, such as to provide reinsurance to insurers in an effort to drive down premiums.

The Iowa Stopgap Measure proposes to reallocate federal dollars that would be spent on advance premium tax credits (APTC) and cost-sharing reduction payments (about $48 million in 2017) toward implementing a newly designed individual health care market. Absent the Stopgap Measure, APTCs are expected to soar from $194 million in 2017 to $350 million, or even $500 million, in 2018. Specifically, Iowa’s Stopgap Measure would include the following:

• Standard plan. Any insurance carrier in the Iowa individual market would provide a single, standard health benefits plan meeting the silver tier requirements of the ACA. This means the plan would cover 68% to 72% of an insured’s costs. These plans would offer all ACA essential health benefits, including preventive services with no cost sharing. The plans would be guaranteed issue, meaning that qualified Iowans could not be turned away, and the plans would not have annual or lifetime health benefit limits. Individuals would purchase these plans directly from participating carriers, not through the current online ACA Marketplace.

• Premium credits. Individuals buying these plans would be allotted a flat monthly premium credit that would be paid directly to the carrier to lower the cost of the individual’s premium, which could be based upon age and rating area. These payments would not be payments to the individual, but funds paid directly to the insurer. A third-party vendor would be enlisted to calculate the amount of the premium credit allocated to each individual based upon age and income. Proof of income would be required at enrollment.

• Reinsurance. Iowa would use a portion of its federal funding to supplement its existing reinsurance program in an attempt to lower the required premiums for these individual plans. This reinsurance program would reimburse carriers for the cost of individual insureds incurring more than $100,000 in claims during a coverage year. Specifically, the program (in conjunction with the Federal High-Cost Risk Pooling Program) would offer 85% coinsurance for claims between $100,000 and $3 million. It would then offer 100% coinsurance protection for claims above $ 3 million.

It is unclear when the federal agencies will make a decision on the request. The regulations provide only that the final decision will be issued no later than 180 days after the determination that an application is complete.

A long-term solution will be required to address the nationwide problems associated with the individual health care insurance market. In the meantime, we will keep you posted on the status of the Iowa Stopgap Measure. Insurance coverage for thousands of Iowans hangs in the balance.

Tidgren is staff attorney and assistant director for the Center for Ag Law and Taxation at Iowa State University. Contact her at [email protected].