Iowa has resorted to an epic act of legal hair splitting in order to bring back the kind of insurance coverage that was supposed to be banned under Obamacare.
On Monday, Gov. Kim Reynolds signed a bill that will let the state’s carriers sell health plans that discriminate against patients with pre-existing conditions and otherwise ignore the Affordable Care Act’s consumer protection rules—as long as the coverage is not called insurance. These totally-not-insurance plans must be sold in partnership with the nonprofit Iowa Farm Bureau, and won’t be regulated by the state’s insurance commissioner, in order to protect the legal fiction that financial products customers pay for in order to cover future medical claims are not, in fact, insurance. Currently, the state’s largest insurer, Wellmark, is getting ready to start offering the fauxsurance plans.
This is not the first time a rural, Republican-led state has lately tried to circumvent Obamacare. Idaho officials were ready to simply let insurers sell plans that did not comply with the federal health law’s requirements until the Trump administration, which otherwise has been doing everything in its power to dismantle the ACA, said the plot was a bridge too far even then. The difference this time is that Iowa’s effort might actually have some precedent. As the Washington Post notes, the state seems to be modeling its scheme on a program run through the Tennessee Farm Bureau, “which began decades ago and has continued in the ACA era” without ever being challenged by the federal government. The reason these farm bureau plans are a bigger deal now is that, with the individual mandate repealed, Americans won’t face a fine for failing to buy something that technically counts as an insurance product, so nothing’s stopping them. The one insurer currently offering coverage on Iowa’s Obamacare exchange has suggested it might sue over the new legislation, but as of now, it seems like the state’s have potentially found a legal loophole.
Iowa’s lawmakers have said that their bill is necessary in order to give the state’s residents relief from high individual insurance premiums on Obamacare’s exchanges. They aren’t wrong that there’s a problem. Iowa’s tiny insurance market has been particularly troubled, in part because it’s too thin to maintain a balance of sick and healthy that keeps prices in check. Again, the state only has one insurer offering Obamacare coverage at the moment, and the average price of a benchmark silver plan rose 117.5 percent last year, more than anywhere in the nation, according to the Urban Institute. That’s not a problem for residents who receive insurance subsidies under the ACA, which cap premiums as a percentage of their income. But it has meant pain for those who don’t get any government help.
Only about 46,000 Iowans bought Obamacare-compliant coverage on the exchanges this year, down from 72,000 for 2017, and many people who found themselves priced out could resort to the farm bureau policies, as will some who are currently paying full-freight for ACA coverage. But, while some Iowans may benefit from this end-run, others will end up worse off. With fewer customers buying it, marketplace coverage will become more expensive, and people with pre-existing conditions who make too much money to qualify for the ACA’s subsidies will be stuck paying through the nose. This has been the basic problem with virtually every Republican effort to deregulate the insurance markets.
While Iowa’s plan may set a disconcerting example for other conservative states that want to ignore the Affordable Care Act’s rules, it may not make a great deal of practical difference in the long term. The Trump administration has separately been laying the groundwork for insurers to offer coverage that doesn’t meet the law’s requirements, by proposing rules that will let carriers sell “short-term” health plans that last up to a year. Insurers will be allowed to price these policies based on customers’ health and reject sick applicants, just like the pre-ACA days. Once the change goes into effect, states won’t have to get quite so creative about sidestepping Obamacare anymore.