Iowa may let small employers buy health insurance that doesn't meet Obamacare rules

Iowa legislators are moving to give small employers more freedom to band together to buy health insurance for their workers, but a central Iowa expert warns the approach might not offer much shelter from skyrocketing premiums.

The “association health plan” proposal, Senate File 2349, passed the Iowa Senate on a 33-17 vote Monday evening. It effectively would allow insurance carriers to resume selling small-employer policies that don’t meet Affordable Care Act rules, such as by not covering maternity care or addiction treatment.

Supporters say the proposal would make it easier for small businesses to help employees find affordable insurance. “This bill is going to provide one more option for Iowans who are not being served in the individual market,” Sen. Dan Zumbach, R-Ryan, said in opening Monday’s Senate debate.

Detractors worry the proposal would help insurers siphon young and healthy workers out of the general risk pool, pushing up costs for middle-age Iowans and those with chronic health conditions.

Sen. Liz Mathis, D-Hiawatha, wondered why the state Legislature is moving so quickly to approve such arrangements when federal officials haven’t set rules allowing them nationally. “I would urge the body to vote no. This just doesn’t make sense,” Mathis said on the Senate floor Monday evening.

An industry expert said in an interview Tuesday that small businesses shouldn’t expect the new approach to yield dramatically lower premiums.

Jesse Patton, a West Des Moines health-insurance broker who specializes in selling policies to small-business associations, supports the Senate bill. But he cautioned it would not be a panacea for employers facing ever-rising health premiums.

Patton predicted health-insurance carriers would be leery of selling policies to new associations because the risks would be unclear. Patton said small employers with a lot of workers who have health problems are the most likely to seek premium relief. That could skew the risk pool in the new plans, he said. “The issue is, if you bind a bunch of sick small groups together, you really haven’t gained much.”

Some associations, such as those for real-estate agents, already help their members buy health insurance, Patton said. Under current law, such associations must be longstanding groups that include businesses from a specific industry. Under the proposed rules, businesses in a region or industry could form new associations and immediately use them to buy health insurance.

The Legislature also is pushing forward a bill that would allow the Iowa Farm Bureau Federation and Wellmark Blue Cross & Blue Shield to sell individual health policies that don’t meet Affordable Care Act rules. Under that proposal, Wellmark could consider an applicant’s health history before setting premium rates, and it could sell policies that lack some of the coverage required under the Affordable Care Act, also known as Obamacare.

Critics fear the Farm Bureau proposal and the association health-plan proposal would further destabilize Iowa's market for individual health insurance, the kind of policy people buy if they don’t have employer-provided insurance or coverage through a government program, such as Medicare or Medicaid.

Mary Nelle Trefz, an Iowa health-care analyst for the Child and Family Policy Center, said Iowa’s individual health-insurance market is already skewed because tens of thousands of relatively healthy Iowans have been allowed to maintain old policies they bought before the Affordable Care Act barred carriers from checking for pre-existing health problems. The new proposal could make that problem worse, by offering another cheaper option for people without chronic health problems, she said.

“We understand this proposal would likely be attractive to healthy individuals without pre-existing conditions — at least while they are healthy. But it would hurt middle-income individuals with pre-existing conditions and contribute to overall market instability,” Trefz wrote in an email to the Register on Tuesday.

But Chance McElhaney, spokesman for the Iowa Insurance Division, said the new alternatives could be important, especially for Iowans who make too much money to qualify for Affordable Care Act subsidies to help pay individual health insurance premiums. McElhaney said in an email that up to 26,000 Iowans who bought individual insurance last year have fled that market, usually because they couldn't afford premiums that in some cases doubled. "Iowans that do not qualify for federal subsidies need options," he wrote.

The Senate bill now goes before the Iowa House.