Iowa proposal that skirts Obamacare regulations could spark court fight

The sole health-insurance carrier selling individual policies in Iowa this year says it might take the state to court if legislators let a competitor ignore Affordable Care Act rules.

Medica is frustrated by a bill the Iowa Senate passed Wednesday evening, which would let Wellmark Blue Cross & Blue Shield partner with the Iowa Farm Bureau Federation to sell a new type of health coverage. The new policies would be defined as “health benefit plans,” which would technically not be insurance and would not be regulated by the Iowa Insurance Division. Although it doesn’t name Wellmark or the Farm Bureau, the bill is written so that only they could sell such policies.

Geoff Bartsh, a vice president for Medica, said the bill “is beyond anti-competitive.” The main problem, he said, is it would let Wellmark check to see if applicants for coverage had pre-existing health problems. Those with chronic illnesses, such as diabetes or cancer, could be rejected by Wellmark and left to sign up for more expensive policies that abide by Affordable Care Act rules.

Bartsh likened the situation to a Monopoly game in which one player starts out with hotels on Boardwalk and Park Place. “The Senate has essentially given Wellmark a $100 million gift,” he said. He added that his company doesn’t understand how such favoritism could be legal, and Medica leaders are looking into whether they could sue to block the law from being implemented.

The issue centers on the individual health-insurance market, which is for people who aren’t offered coverage by an employer or a government program, such as Medicare or Medicaid. Iowa's individual health-insurance market has been rocked by steep price increases and the exit of several carriers in recent years.

The situation could become murkier because of a letter the Trump administration sent to Idaho leaders Thursday.

Idaho’s Republican governor, Butch Otter, has encouraged health insurers there to sell individual policies that don’t follow Affordable Care Act regulations. President Trump’s top health-care regulator, Seema Verma, wrote to Idaho's governor and insurance commissioner that she shares their criticism of Obamacare and appreciates their effort to offer alternatives for consumers. However, she wrote, the Affordable Care Act “remains the law and we have a duty to enforce and uphold the law.” If Idaho doesn't enforce it, federal officials could step in and do it for them, she warned.

Verma encouraged Idaho to look at other alternatives, including expanded use of "short-term" insurance plans. Last week, she published an opinion piece in the Des Moines Register touting the use of such plans for people who can't afford full-fledged individual health insurance policies.

Idaho’s alternative health-insurance proposal has some differences from Iowa’s, but it has a similar aim. Verma's office and Iowa insurance regulators did not immediately respond to requests for comment Friday about any effects Verma’s letter to Idaho might have on the Iowa proposal.

Bartsh said Verma's warning letter to Idaho should apply to Iowa's proposal. "This is clear direction from the federal government that federal laws, including the ACA, apply to health coverage," he wrote in an email to the Register.

The Iowa Senate bill, which its authors describe as a temporary fix, passed the Senate on a 40-9 vote Wednesday and is now before the Iowa House. Supporters say it could offer an alternative for thousands of Iowans now facing premiums that can run past $30,000 per year for a family. The new alternative health plans could have substantially lower premiums for young and healthy adults, although the plans' benefits could be limited. For example, they might not cover maternity care or mental-health care.

The new plans would not qualify for Affordable Care Act subsidies, which are generally available to people who make less than 400 percent of the federal poverty level, or about $48,000 annually for a single person. Experts say the new plans likely would appeal to healthy people who make more than that much per year.

Sen. Randy Feenstra, a Hull Republican who led Senate debate on the bill, said in an interview Thursday he’s confident the arrangement could withstand a legal challenge because it defines the coverage as not being insurance.

He said the bill was tailored for Wellmark and the Farm Bureau because they created the "pilot project" for alternative coverage that could help families. "Bottom line, Iowa cannot just sit idle and see people pay thousands of dollars a month for insurance; or simply not have insurance," he said.

Feenstra, who is a former insurance agent, said the Legislature did not intend to exclude other insurance carriers from setting up similar arrangements with other Iowa associations. “If Medica wants to do that, I’d be all over it,” he said.

Bartsh said later that if Feenstra feels that way, he should change the bill to open the new plans up to any insurance carrier.

Spokeswomen for Wellmark and the Farm Bureau did not respond to requests for comment.

A national health-law expert said the legality of the Iowa bill is debatable, but its impact is predictable. “Medica is absolutely right that the effect of this would be to vacuum all the healthy people out of the market,” said Tim Jost, an emeritus law professor at Washington and Lee University in Virginia.

Jost said if that happened, premiums would have to rise even faster for any Iowa insurance plans that still comply with the Affordable Care Act, because they would be left mainly with unhealthy customers.

Medica has already been struggling with higher than expected health-care costs for the Iowans it’s covering. For 2018, Iowa Insurance Commissioner Doug Ommen reluctantly allowed the carrier to raise premiums an average of 57 percent to keep up with the cost of care.

Bartsh said Medica doesn’t want to abandon the 46,000 Iowans now covered by the company’s individual policies. But he said Medica would have to reconsider its long-range plans for Iowa if the Wellmark and Farm Bureau bill becomes law. “We’re not going to make any rash decisions,” he said.

A national health-policy analyst watching the situation said the Iowa proposal is different enough from Idaho's that it probably could pass muster with Verma's federal agency. Sarah Lueck, who works for the Center on Budge Policy and Priorities in Washington, D.C., said Iowa's definition of the new coverage as an alternative to insurance makes it substantially different from Idaho's plan, which would essentially let insurers ignore insurance regulations.

Lueck, who is an Iowa native, said the new Iowa arrangement could be concerning for consumers, because their policies would not be regulated by the government. "God forbid something should go wrong and claims don't get paid," she said. She added that creating a parallel market for coverage could make the main one even more rickety than it already is. "Splitting the market by sending healthy people over here and unhealthy people over there is not the way to run a sustainable market," she said.

Chance McElhaney, the Iowa insurance commissioner’s spokesman, said the Senate bill offers an alternative worth exploring. "We do not see anything improper about what the 40 state senators of both parties have proposed in passing this bill out of their chamber,” he wrote in an email to the Register. He noted the Legislature also is working on a proposal to allow some small businesses to buy insurance outside of the Affordable Care Act, and the federal government is moving to loosen rules on short-term policies for individuals. He added that Iowans who qualify for Affordable Care Act subsidies should still be able to use them on full-fledged individual insurance plans for 2019.

Wellmark isn’t currently selling individual plans that comply with the Affordable Care Act, but it recently said it intends to re-enter that part of the market for 2019. That could wind up being a safeguard if Medica, which is the sole current carrier, decides to pull back next year because of the controversy over the Wellmark bill.

The new plans could be an option for thousands of current Wellmark customers who bought their policies between when the Affordable Care Act passed Congress in 2010 and when it was implemented in 2014. Consumers holding such "grandmothered" policies have been allowed to keep them until now, but the policies are to end this year. Bartsh said the new non-Obamacare plans would let Wellmark and Farm Bureau hang on to those who could pass health screens, while sending the rest to plans that do follow Affordable Care Act rules.