Iowa health insurance market stable, but still broken

by Travis Fischer

Those that liked their health insurance will get to keep it for at least another year as the Centers for Medicare and Medicaid Services have approved the extension of transitional policies in Iowa through 2020.

Transitional plans and plans that were grandfathered in following the passage of the Affordable Care Act continue to be utilized by over 82,000 Iowans and while the continued renewal of these plans has been uncontroversial, their sustainability is not guaranteed. By definition, these grandfathered insurance plans are inaccessible to anybody that does not already have them. As time goes on, the pool of people on these plans will naturally decrease, eventually forcing premiums to rise and making them unaffordable for those that remain.

Though it hasn’t happened yet, this will leave few good alternatives for people seeking coverage elsewhere. Those that don’t have employer based coverage may have to turn to the individual marketplace, where premiums can be double of what the grandfathered plans are today, or simply go without insurance at all.

“I think they view that as long as you’re seeing these crazy high prices in the ACA market it seems like a pretty simple decision,” says Iowa Insurance Division (IID) Commissioner Doug Ommen. “I’m confident that if you try putting them into the ACA market, they’re going to leave the individual market entirely.”

Since activation of the Affordable Care Act’s major provisions in 2014 the law has been successful in expanding health coverage to low income Iowans, particularly through expanding Medicaid to 144,000 more people and providing subsidized coverage to people that make up to 400 percent of the poverty line.

While this brought in a large number of Iowans that had been previously unable to afford health insurance, particularly when insurers were able to deny coverage due to pre-existing conditions, insurers dramatically underestimated the number of high cost individuals that the new law would have them cover.

This resulted in spiking premium prices, particularly for people that did not qualify for subsidized coverage, causing a downward spiral for the market where an exodus of people triggered an increase in premiums, which would subsequently trigger another exodus of people.

In 2017 the individual market faced a crisis as this death spiral caused insurers like Wellmark and Aetna to drop out of the marketplace all together. For several weeks it appeared that Iowa may not have any option for individual insurance in 2018, however Medica decided to stay in, though they implemented a 43.5 percent increase in their premiums to do so.

Since then the market has bounced back with Wellmark returning, leaving Iowa with two options for individual insurance in 2019 and forward.

“It has reached a new stability that is heavily made up of people who are able to access advanced premium tax credits in order to avoid experiencing the costs of those high rates,” said Ommen.

Tax credits provided by the ACA keep lower income Iowans from feeling the sting of increasing premiums by capping the amount of money they are required to pay

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for insurance in a given year based on how much they make. Once an individual is paying a 9.86 percent of their income towards premiums, the subsidies cover the rest. For those that have reached that cap, a 15 percent increase or a 50 percent increase in premiums makes no difference to their wallet.

However, while the individual market seems to be stable for lower-income Iowans, those in the middle-class that haven’t reached that cap or don’t qualify for subsidies at all have faced large increases in premiums that has priced them out of market. According to the IID, Iowa’s individual market is now almost entirely subsidized. Overall, the number of people in the individual market has dropped from 170,000 to just over 100,000 since 2015.

One of the problems with the ACA that Ommen has identified is the hard-line for subsidy qualification. People that make just under 400 percent of the federal poverty level ($49,960) will see their premiums capped at 9.86 percent of their income. People that make just over that amount are ineligible for subsidies, which can increase their costs by thousands, if not tens of thousands for a family plan.

For Iowans whose income can wildly vary from year to year, particularly in the agricultural industry, this has led to a situation where people have to stop working in the last months of the year in order to keep their income low enough that they still qualify for subsidies.

“The way this is built, you have to pin yourself down income wise,” said Ommen. “You should not be dependent on not working in November and December.”

The un-affordability of the individual market to those that aren’t subsidized may be having an impact on Iowa’s economy as workers become more dependent on employer based insurance, where most Iowans receive their coverage.

“There’s a lot of young farmers and entrepreneurs that now they’re being tied to their job if they want to have insurance because they’re priced out of the ACA,” said Ommen. “Because we are a highly employed state, I think we have to have an individual market because that gives people flexibility.”

There are some options for people looking for an alternative to the individual market. Last November the Iowa Farm Bureau launched a “health benefit plan” that offers members similar coverage without being held to the minimum standards of the ACA. However, their impact on the overall market has been minimal, serving just a few thousand out of the 175,000 that the individual market could potentially serve.

Ommen says that the individual market could potentially be improved by introducing a reinsurance mechanic to protect insurers from high-cost individuals and strictly enforcing continuous coverage requirements to make it harder for people to drop in and out of the market. Adjusting premiums to account for risk, which would lower premiums for the young and increase them for the elderly, would also encourage more young people to stay in the market.

But before any of that can happen, Ommen says that the federal government needs to build a framework that both parties can agree to so that insurers can make long term plans.

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