Highlights and updates
- State enacts legislation to allow off-exchange sale of non-ACA-compliant plans
- Exchange enrollment up 3% in 2018, but off-exchange enrollment sharply down
- Wellmark commits to re-entering Iowa exchange in 2019
- Withdrawn 1332 waiver proposal would have radically change Iowa’s market
- Wellmark, Aetna, and Gunderson left the exchange at the end of 2017
- Medica is the only insurer in the exchange in 2018
- Medica’s average rate hike was 56.7 percent for 2018
Iowa exchange overview
Iowa operates a partnership exchange with the federal government. Iowa residents use the federal marketplace, HealthCare.gov, to compare and purchase coverage. The state is responsible for plan management, consumer assistance, and Medicaid eligibility determination.
Iowa’s plan management functions include selecting and monitoring the qualified health plans (QHP) that offer policies on the exchange. Iowa’s role in consumer assistance is education and outreach, coordinating the in-person consumer assisters, and overseeing the Navigator program. The federal government manages the exchange website and call center, and funds the Navigator program.
But federal Navigator funding was cut significantly for the fall 2017 open enrollment period (for 2018 coverage), as was funding for outreach and advertising for HealthCare.gov. Open enrollment for 2018 ran from November 1, 2017, to December 15, 2017, which was half as long as previous open enrollment periods.
Iowa legislation will allow Farm Bureau to sell non-ACA-compliant Wellmark plans outside the exchange
Iowa SF2329 and HF2364 were introduced in February in Iowa in an effort to allow the Iowa Farm Bureau to sell plans throughout Iowa that would not be considered insurance and therefore not subject to insurance regulations. The plans would be available to any Farm Bureau members; membership is available to anyone in Iowa, for an annual fee of $55 or less. SF2329 passed 40-9 in the Senate in March, and headed to the House.
But at the same time, SF2349, which allows for the creation of employer association health plans, had also passed the Senate in March. Ultimately, the House ended up combining the bills together to create one piece of legislation that simultaneously allows for association health plans and for the sale of the Farm Bureau non-insurance plans. SF2349 is the final legislation — SF2364 was added to it as Amendment H8289, on March 21. The amended bill passed in the House on March 27, and the Senate approved the House’s version on March 27, by a 37-11 vote. The legislation was signed into law by Governor Kim Reynolds on April 2, 2018.
Iowa’s Farm Bureau proposal is modeled after the way Tennessee exempted Farm Bureau from insurance regulations when the ACA was implemented, allowing people to continue to enroll in Farm Bureau plans, outside the exchange, despite the fact that the plans do not comply with the ACA’s rules.
Wellmark has a long history of partnering with the Iowa Farm Bureau, but those plans were no longer allowed to be sold as of 2014, because they weren’t ACA-compliant. The new legislation will allow Wellmark to once again partner with the Iowa Farm Bureau to offer health plans that aren’t compliant with the ACA. The legislation is specific to health plans “sponsored by a nonprofit agricultural organization domiciled in [Iowa] and created primarily to promote programs for the development of rural communities and the economic stability and sustainability of farmers,” so it only applies to Farm Bureau and their partnership with Wellmark—other insurers will not be able to just start offering unregulated plans in the state. Not surprisingly, Medica, which is the sole insurer offering plans in Iowa’s exchange in 2018, was opposed to the legislation, as it will specifically benefit a competitor, while potentially destabilizing the ACA-compliant market that Medica currently serves.
The fiscal note for SF2349 clarifies that the coverage will be self-funded by Farm Bureau, with the insurer (Wellmark) serving as a third-party administrator, rather than the risk-bearing entity. The Farm Bureau plans are slated to become available as of July 2018. Their target market will be people who have left the individual market in Iowa in 2018 due to rising premium costs (people without premium subsidies saw sharp premium increases in 2018), but the legislature also estimates that about 4,000 people who currently have ACA-compliant coverage in Iowa (and who are paying an average of $17,000 in annual premiums) will switch to Farm Bureau plans.
Farm Bureau plans would only appeal to healthy consumers, and likely to those on the younger end of the age spectrum, because they would be medically underwritten. Since they wouldn’t be regulated as health insurance, they would be able to skirt the ACA’s rules about guaranteed issue, essential health benefits, allowable age bands for premiums, and modified community rating (ie, the ACA only allows premiums to vary based on age, zip code, and tobacco use, but Farm Bureau plans would be able to include price variation based on things like medical history and gender).
In a press release announcing their intent to rejoin the Iowa exchange in 2019, Wellmark noted that they planned to “explore offering additional options outside of the ACA for Iowans, if state and federal rules allow us to do so.” Wellmark has supported the Farm Bureau measure, and would likely partner with Farm Bureau again to offer unregulated plans to Farm Bureau members if the legislation is enacted.
Supporters of the Farm Bureau measure believe that it’s the best solution for the roughly 26,000 people who left the individual market in Iowa between 2017 and 2018. These are the people who don’t qualify for premium subsidies in the exchange, and for whom ACA-compliant health insurance is simply unaffordable (a 40-year-old couple in Des Moines with two children and a household income in excess of $98,400 is paying at least $20,000/year in premiums for the cheapest bronze plan available in 2018, in addition to the out-of-pocket costs; a 60-year-old couple in Des Moines is paying at least $27,000/year in premiums for that cheapest bronze plan if their income exceeds about $65,000).
The idea is that the Farm Bureau plans could provide a lower-cost alternative for these individuals, which is arguably better than being uninsured. But long-term, the results of the Farm Bureau plans could be disastrous. Undoubtedly, the people who will join the Farm Bureau plans will be younger, healthier individuals. And while many of them will be from the population that has already left the individual market, an estimated 4,000 people will likely be siphoned off from the current ACA-compliant insurance pool, particularly among the young, healthy people who may currently qualify for subsidies in the exchange but for whom Farm Bureau plans would still be less expensive. That would serve to further weaken the insurance pool in Iowa, and might make Medica reconsider their presence in the state’s market (Medica has been opposed to the legislation that would allow Wellmark/Farm Bureau to sell unregulated plans in Iowa).
In Tennessee, people who currently buy unregulated Farm Bureau plans must pay the ACA’s individual mandate penalty (which is still in place in 2018) unless they’re exempt from the penalty. But the penalty will be eliminated at the end of 2018 under the terms of the GOP tax bill that was enacted in December 2017. So people with non-ACA-compliant Tennessee Farm Bureau plans will no longer be subject to the penalty as of 2019, and neither will people who enroll in Iowa Farm Bureau plans for 2019. This is likely to make the unregulated plans even more appealing.
The Iowa Farm Bureau plans are set to become available as of July 2018, although people who switch to Farm Bureau in 2018 will still be subject to the ACA’s individual mandate penalty until the end of 2018, unless they’re exempt. But for many people facing unaffordable premiums in Iowa, an affordability exemption is available. If the lowest-cost bronze plan is more than 8.05 percent of your income, you’re eligible for an exemption from the penalty. For the 60-year-old Des Moines couple described above, the affordability exemption would be available as long as their income is less than about $318,000 in 2018. People who are exempt from the individual mandate penalty in 2018 will be able to switch to Farm Bureau plans without having to pay the individual mandate penalty.
For people with pre-existing conditions who also qualify for premium subsidies in the exchange, ACA-compliant coverage will continue to be affordable, thanks to ballooning subsidies. But for people with pre-existing conditions who aren’t eligible for premium subsidies, the Farm Bureau plans will make the current situation even worse, as they will result in even higher premiums.
At the federal level, the most obvious solution would be to eliminate the 400 percent of povery level cap on premium subsidies, and simply ensure that nobody has to pay more than 9.56 percent of their income for the benchmark plan (or 8.5 percent, as Democratic lawmakers have proposed). But there’s little political will among Republicans to do that, so it’s unlikely to happen while the GOP controls Congress.
Iowa is certainly faced with a dire situation for people who aren’t eligible for premium subsidies, but the Farm Bureau solution isn’t likely to help the situation in the long run. The elimination of grandmothered plans at the end of 2018 would help to stabilize the individual market (and it would have been much better if Iowa had cut off grandmothered plans in 2014 or 2015, instead of allowing them to continue through 2018) but only if people who currently have grandmothered plans have to switch to ACA-compliant plans. If they have the option of switching to medically underwritten Farm Bureau plans, only sick members of that population are likely to join the ACA-compliant insurance pool, leading to further destabilization. A state-based reinsurance program would also help Iowa’s market. The state submitted a 1332 waiver in 2017 that would have included reinsurance, but it was too complex to meet the 1332 waiver rules and the state abandoned it in October 2017.
2018 enrollment: 3% higher than 2017.
But the cost of cost-sharing reductions was added to silver plans in the exchange in Iowa for 2018, resulting in much larger premium subsidies (relative to the cost of non-silver plans) than people received in previous years. This may have made exchange coverage particularly attractive for some enrollees. For example, a 50-year-old in Des Moines who earns $28,000 in 2018 can get a bronze plan for as little as $1.28/month in 2018, thanks to a $742/month premium subsidy.
Open enrollment for 2018 ended in December 2017, but people who experience a qualifying event can still enroll, as can Native Americans and anyone eligible for Medicaid or CHIP. There was a special enrollment period (triggered by a loss of coverage qualifying event) for everyone in Iowa whose plans were terminated that the end of 2017 due to the exits of Wellmark, Gunderson, and Aetna. All of those individuals had until March 1, 2018 to enroll in coverage for 2018.
By February 2018, the Iowa Insurance Division reported that total enrollment in ACA-compliant plans stood at 46,563, presumably almost all of whom had coverage through the exchange (41,742 were receiving premium subsidies, which are only available through the exchange). Effectuated enrollment in the exchange had been at 46,519 as of February 2017. But Iowa officials noted that there had been a substantial market exodus from the off-exchange ACA-compliant individual market in 2018, with more than 20,000 people leaving the market due to the sharply higher premiums in 2018. People who receive premium subsidies are insulated from those higher rates (and some are better off in 2018 than they were in prior years, due to the much larger premium subsidies). But there is no relief for people who don’t get premium subsidies, including everyone who shops off-exchange.
HHS estimated in 2016 that there were 41,000 people with individual market coverage in Iowa who would be eligible for premium subsidies if they switched to coverage in the exchange — at that point, those individuals had coverage outside the exchange. Some of them had ACA-compliant coverage purchased off-exchange, while others had grandmothered and grandfathered plans that were purchased prior to 2014 (for perspective, Wellmark has about 70,000 people on grandmothered and grandfathered individual market plans in Iowa, and they will be able to keep those plans in 2018 if they choose to do so).
Wellmark commits to rejoining Iowa’s exchange for 2019, wants to also sell non-compliant plans off-exchange
Wellmark joined the exchange in Iowa for 2017, after offering only off-exchange plans for the first three years of ACA implementation. But on April 3, 2017, the insurer announced that they would exit the ACA-compliant individual market (both on and off-exchange) at the end of 2017. Wellmark said that the planned exit would mean that roughly 21,400 people would need to secure new coverage for 2018.
All of Wellmark’s ACA-compliant individual market plans terminated on December 31, 2017. But just over a month later, in early February 2018, Wellmark issued a press release stating that they would offer ACA-compliant plans in the Iowa exchange for 2019, “assuming there aren’t any significant changes to the Affordable Care Act.” At that point, the only significant change that had been made to the ACA was the elimination of the individual mandate penalty, effective in 2019.
Wellmark noted that the repeal and replace dialog that dominated the federal government’s health policy discussions in 2017, resulting in significant uncertainty for insurers, “has dissipated just enough that we think we’re able to step back in and serve the market segment that we had historically been in and we want to be in.” This highlights the role that Congress and the Trump Administration had in the myriad insurer exits from the ACA-compliant market across the country at the end of 2017, many of which directly cited federal uncertainty as their primary reason for leaving the market.
Wellmark’s 2017 exchange plans were narrow-network HMOs, but rates and plans for 2019 have not yet been filed, so it’s unclear what type of coverage the insurer plans to offer in 2019. But Wellmark plans to offer exchange coverage statewide in Iowa in 2019. Wellmark’s plans were only available in 40 of the state’s 99 counties, in 2017, with the carrier’s Mercy Health Network HMO (Wellmark Value Health Plan) the available exchange option in 36 of those counties. Assuming Medica continues to offer statewide coverage, all residents in Iowa will have two insurer options on the exchange when open enrollment begins on November 1, 2018.
Wellmark also noted that they would “explore offering additional options outside of the ACA for Iowans, if state and federal rules allow us to do so.” That’s likely a nod to Iowa SF2329, which overwhelmingly passed the state Senate in early March and would allow Farm Bureau and Wellmark to sell non-ACA-compliant plans outside the exchange in Iowa, much like the Farm Bureau plans that are sold in Tennessee (and somewhat similar to the non-ACA-compliant plans that Idaho has green-lighted, although Idaho’s plans are slated to be considered individual health insurance, whereas the plans sold in Tennessee are not regulated as insurance, nor would Iowa’s plans be regulated as insurance).
When Wellmark announced their exit from the ACA-compliant market in 2017, the insurer noted that they had lost $90 million in that market over the previous three years. They explained that younger, healthy people have been slow to enroll, leaving an older, sicker pool of insureds — a situation that is not sustainable over the long term. Wellmark in Iowa also had a uniquely expensive enrollee, whose claims totaled $1 million per month (a teenager with severe hemophilia) and who accounted for a quarter of their total rate increase (across all members’ plans) in 2017.
1.64 million Wellmark members in the state were not impacted by the insurer’s exit from the ACA-compliant market at the end of 2017. This included people who had grandfathered and grandmothered individual market Wellmark plans (ie, people whose plans took effect prior to 2014). People with employer-sponsored plans (including ACA-compliant small business plans) and Medicare supplement plans were also not impacted.
Wellmark had previously announced in September 2016 (just before they began offering exchange plans for sale) that they would no longer offer Gold plans in the individual market, nor would they “promote” individual market PPOs. But they noted that people with existing off-exchange Bronze and Silver PPOs in Iowa would be able to keep those plans in 2017. The switch away from PPOs and towards HMOs and EPOs has been a nationwide trend over the last few years.
Iowa is one of the states that is allowing grandmothered (transitional) health plans to remain in force per the Obama Administration’s transitional relief, which now permits states to allow grandmothered plans to continue to renew until October 1, 2018, and remain in force as late as December 31, 2018. Iowa had initially opted to make October 1, 2016 the latest date these plans could remain in force, but ultimately went along with the guidance that CMS issued in February 2016. An additional extension was issued by the Trump Administration HHS in February 2017, allowing grandmothered plans to remain in force throughout 2018. Iowa agreed to that extension as well.
A significant number of Wellmark’s pre-2014 enrollees have opted to keep their non-ACA-compliant plans. The Des Moines Register reported that roughly 55,000 people still had 2016 Wellmark plans in Iowa that had been in effect since before the ACA was enacted, and that’s in addition to people with grandmothered plans.
Wellmark had 137,000 individual market members in Iowa in 2015, but the majority of them had non-ACA-compliant health plans. HealthCare.gov’s rate review tool indicates that about 33,000 Wellmark insureds (3,046 plus 29,975) had ACA-compliant plans in 2015, although the Iowa Insurance Division’s August notice regarding Wellmark’s rate increase stated that there were roughly 23,000 members on ACA-compliant plans at that point. Despite expanding onto the exchange for 2017, total enrollment in the insurer’s ACA-compliant plans was slightly lower in 2017 than it was in 2015.
2018: Only Medica remaining in the exchange; 56.7% average rate hike is offset by subsidies for most exchange enrollees
In the spring of 2017, Iowa was one of just a few states facing the most uncertain market conditions for 2018. Insurers in Iowa had to file rates and plans by June 19, 2017 if they wished to offer plans in the individual market in 2018, and for a while, it wasn’t clear that there would be any filers.
But ultimately, Medica did file plans for statewide coverage in Iowa in 2018, albeit with an average rate increase of 43.5 percent, which they later revised (in August) to 56.7 percent (average rate increases vary from 44.4 percent to 61.2 percent, depending on the plan). The proposed rate increases were approved by state regulators and implemented as of January 2018.
Medica’s revised 2018 rates were based on the assumption that cost-sharing reductions (CSRs) would not be funded by the federal government in 2018; higher rates for silver plans to account for the lack of funding were incorporated in the proposed rates. CSR funding was eliminated by the Trump Administration in October 2018, but Medica had already planned for that contingency with their proposed rates, so no additional changes were necessary once CSR funding was eliminated.
According to their rate filing, Medica had about 14,000 enrollees who were expected to be impacted by their 2018 rate increase. But the rest of Iowa’s individual market enrollees had to transition to Medica plans if they wanted to remain covered in 2018.
A 56.7 percent rate increase is eye-popping, but of the approximately 72,000 Iowa residents who had ACA-compliant individual health insurance in 2017 (including on and off-exchange), more than 40,000 were receiving premium subsidies (premium tax credits) as of early 2017. Premium subsidies are only available in the exchange, and the majority of the people who weren’t receiving premium subsidies have purchased coverage outside the exchange.
The ACA’s premium subsidies are still in effect in 2018. The subsidies grow to keep pace with average premiums in each area, and are based on keeping the cost of the second-lowest-cost silver plan at an affordable level. Since Medica is the only insurer offering plans throughout the state, there isn’t as much variation from the average premium as there would be if multiple insurers were offering coverage. So subsidies in Iowa grew significantly in 2018, offsetting much of the rate hikes that people would have otherwise experienced. But that help is only available for people whose income doesn’t exceed 400 percent of the poverty level, and who don’t have access to employer-sponsored insurance. For those who aren’t eligible for premium subsidies, there’s was no avenue for relief from the 2018 rate hikes, which made coverage unaffordable for many.
As of February 2018, the Iowa Insurance Division reported that 46,563 people had in-force ACA-compliant individual market coverage in the state, and nearly 90 percent of them were receiving premium subsidies. Most of the people who weren’t eligible for premium subsidies have left the ACA-compliant individual market for 2018. There’s an exemption from the ACA’s individual mandate penalty if the lowest-cost bronze plan would cost more than 8.05 percent of household income, which likely applies to many of the people who left the unsubsidized market at the end of 2017.
Wellmark, Aetna, and Gunderson exited the individual market
Iowa had four insurers offering coverage in the exchange in 2017: Wellmark, Aetna, Medica, and Gunderson. The Iowa Division of Insurance confirmed that there were no additional insurers offering ACA-compliant individual market plans only outside the exchange.
On April 3, 2017, Wellmark announced that they would exit the ACA-compliant individual market (both on and off-exchange) at the end of 2017. Roughly 21,400 people who had Wellmark coverage needed to sign up with Medica for 2018.
On April 6, just days after Wellmark’s announcement, Aetna also said that they would stop offering individual market plans in Iowa at the end of 2017. Aetna had 42,000 enrollees in individual market plans as of 2016. People who had Aetna coverage also needed to switch to a plan offered by Medica instead.
Medica, which was the only insurer that offered coverage statewide in 2017, had previously said that they would not be able to remain in the exchange “without swift action by the state or Congress to provide stability to Iowa’s individual market.” The state made an effort to stabilize the individual market via a 1332 waiver (details below), but there was controversy as to whether it would have been effective. And the federal government did nothing to try to stabilize the individual insurance markets in the summer and fall of 2017 (a market stabilization regulation issued by HHS in April 2017 was somewhat controversial in terms of whether its provisions would really prove to be market stabilizing or detabilizing).
Medica filed rates for plans in neighboring Nebraska for 2018, and CNBC reported on June 16 that Medica was planning to file rates for Iowa. But there was still some uncertainty around their impending filing, with Medica’s CEO noting that “our intent is to be in Iowa. … We want to help the individuals, the farmers, the small business owners in Iowa. But until we have clarity on rules, we will not make a final call until we have that.” The suspense ended on June 19, when Medica filed rates for statewide coverage in Iowa in 2018 — although contracts with HealthCare.gov didn’t have to be finalized until late September.
Gunderson only offered plans in five counties (Allamakee, Clayton, Fayette, Howard, and Winneshiek) in the northeastern part of the state in 2017. They did not file plans for 2018 coverage, and Des Moines Register health care reporter, Tony Leys, confirmed on July 6 that Gunderson was officially notifying residents in those five counties that their plans would no longer be available after the end of 2017. Thus, Medica is the only insurer offering coverage in the state’s individual market in 2018.
Iowa withdrew their ambitious 1332 “Stopgap Measure” waiver that would have radically changed the individual market
Medica filed plans for 2018 coverage in Iowa, but there was a period of time in mid-2017 when there was considerable uncertainty in terms of whether Iowa would have any insurers offering coverage in the exchange for 2018. There is no federal backup system in place if an area were to end up with no participating exchange insurers (or no individual market insurers at all). All areas of the country ultimately ended up with insurers slated to offer coverage for 2018, but there were initially quite a few “bare” spots.
In June 2017, Iowa submitted a 1332 waiver proposal to CMS, asking for expedited approval and leniency in terms of the rules that normally apply to the 1332 waiver process. The Iowa Insurance Division established a page where people could submit and read public comments about the proposal, and the state moved forward with their proposal, dubbed “the Iowa Stopgap Measure,” despite the fact that Medica filed plans for 2018.
Ultimately, Iowa withdrew their waiver proposal a week before the start of open enrollment, when it became apparent that approval would not be granted in time, and that the rules regarding 1332 waivers simply weren’t flexible enough to implement the changes that Iowa was pursuing.
The state wanted a one-year waiver from ACA rules (with the option to renew if necessary) in order to implement their Proposed Stopgap Measure (PSM). CMS declared their waiver proposal to be complete on September 19, opening up a comment period that ran through October 19 (public comments that were submitted can be seen here).
At that point, there would have been very little time for CMS to approve the measure and for Iowa to implement it in time for 2018 coverage. But Iowa had asked that their waiver proposal become effective immediately upon approval (sometime after October 19), and Iowa Insurance Commissioner Doug Ommen noted on September 20 that “We [Iowa regulators] look forward to moving through that [federal public comment period] process and getting that approval. We’re not going to wait [to begin setting up the program] until we get the final approval from the United States because this is really important for Iowa. I’ve compared those rates that were submitted under the ACA and I’ve looked at what it is that is available to Iowans under the stopgap — and frankly, the right answer for Iowa in 2018 will be the stopgap measure.”
However, it’s worth noting that the 56.7 percent average rate increase that Medica proposed (without the 1332 waiver), and which was ultimately approved, was based on the assumption that the federal government wouldn’t continue to fund CSRs. If Congress had allocated the money, or if the Trump Administration had committed to ongoing funding, the rate hikes would have been smaller.
The state could have also improved the risk pool by cutting off grandmothered plans, but they’ve opted instead to allow those plans to continue until the end of 2018. And as David Anderson and Brad Wright explain, Iowa could have also required Medica to offer at least two silver plans in the exchange for 2018, with a minimum price differential, in order to make coverage more appealing to subsidized buyers. In short, there are actions, far less drastic than the proposed 1332 waiver, that Iowa and/or the federal government could have taken in 2017 to provide additional stability to Iowa’s insurance market. As it was, enrollment in Iowa’s exchange increased for 2018, improving the state’s chances of market stability.
Ommen’s comments in September indicated that his office was working with Medica (and possibly Wellmark) to create the infrastructure for the Stopgap Measure ahead of time, so that it could have been implemented immediately if CMS had approved the state’s 1332 waiver. Ommen noted on September 20 that over the past week, he had “some really good communication with the federal government and the Trump Administration. So, we are very, very optimistic we will receive approval” for the 1332 waiver.
In early October, however, there were widespread reports that President Trump had instructed CMS to reject Iowa’s waiver proposal, and there were ensuing questions as to his motivations. Some noted that his overarching focus when it comes to Obamacare is trying to make it fail, which could conceivably include rejecting a waiver — allowed under Obamacare — that lets a state make major changes to Obamacare. But others have pointed out how odd it is for a Republican President to call for the rejection of a waiver proposal that would make a state’s insurance regulations much more conservative. Iowa’s waiver proposal includes market reforms that are similar to some that were proposed earlier this year by Republican lawmakers intent on repealing the ACA.
On October 19, CMS notified Iowa that the state would not be eligible to receive the full amount of the pass-through savings that would result from the elimination of ACA premium subsidies under the waiver (the state had planned to use all of that funding to implement its new program). CMS explained that they would have to retain some of that funding to offset the reduced federal revenues that would not be paid in the form of individual mandate penalties (since fewer people would be insured) and employer mandate penalties (since there would no longer be employer mandate penalties in Iowa if exchange premium subsidies were eliminated, since those are what trigger the employer mandate penalties). CMS also noted that the federal government would no longer receive exchange user fees for Iowa (a reduction in revenue) and would incur costs for making HealthCare.gov unavailable to Iowa residents (an increase in spending). More details about all of this are listed below.
Since 1332 waivers have to be budget-neutral for the federal government, CMS explained that they would have to deduct those four increased costs and/or reduced revenue from the amount of pass-through funding that Iowa would receive if the waiver were to be approved. A few days later, Iowa withdrew their waiver proposal with a tersely worded letter, noting that “Section 1332 waivers in the Affordable Care Act are unworkable.”
In a nutshell, here’s what Iowa was proposing:
- Iowa would have developed a “PSM Plan” which would have been a single standardized plan that all participating insurers would offer (Wellmark said that they would offer the PSM Plan statewide if it’s approved, and Medica was also involved in the state’s discussions leading up to the 1332 waiver proposal, so presumably they would also offer the PSM Plan; Tony Leys of the Des Moines Register reports that Aetna said they were definitely leaving Iowa’s individual market, regardless of whether the PSM Plan was implemented).
- The PSM Plan would have been equivalent to an ACA silver-level plan, with an actuarial value range of 68-72 percent. It would have included coverage for the ACA’s essential health benefits and all Iowa-mandated benefits, but it would have had a deductible of $7,350 for a single person and $14,700 for a family (cost-sharing reductions would reduce this for low-income enrollees).
- Under the initial waiver proposal, there would have been no cost-sharing reductions for lower-income enrollees, which means out-of-pocket costs would have been considerably higher for that population. 52 percent of Iowa exchange enrollees in 2017 were receiving the ACA’s cost-sharing reductions. However, Iowa filed a supplement to the 1332 waiver proposal in August, adding cost-sharing reductions for people with income between 133 and 150 percent of the federal poverty level. The state later filed another supplement to the waiver proposal in early October, which called for continued cost-sharing reductions for people with income up to 200 percent of the poverty level. Cost-sharing reductions under the ACA extend to 250 percent of the poverty level (although they’re substantially less generous for people with income above 200 percent of the poverty level), so Iowa’s proposal would have cut them off at a lower level. However, Iowa’s cost-sharing reductions would have been actuarially equivalent to the ACA’s for people with income between 133 percent and 150 percent of the poverty level (people with income under 133 percent of the poverty level would continue to be eligible for Medicaid), with plans having 94 percent actuarial value and a $600 individual maximum out-of-pocket. For those with income between 150 and 200 percent of the poverty level, the ACA provides plans with actuarial value of 87 percent, while Iowa would provide plans with an actuarial value of 83 percent (out-of-pocket exposure for a single person would be capped at $2,450).
- People with income above 200 percent of the poverty level would have been ineligible for cost-sharing subsidies. Those enrollees are eligible for only minimal cost-sharing subsidies under the ACA (silver plans with an actuarial value of 73 percent, instead of the regular 70 percent that applies to silver plans), but they would have lost even that little bit of cost-sharing assistance under Iowa’s proposal. A single person with income a little over $24,000 would have been faced with a deductible of $7,350, with no alternative plans available (under the ACA, that person can use his or her premium subsidy to purchase a plan at a higher metal level, with more robust coverage).
- To fund premium subsidies for the PSM Plan and a reinsurance program to protect insurers from very high-cost claims, Iowa would have used money that the federal government would have spent on premium subsidies and cost-sharing reductions (assuming there would have been insurers offering plans in the market, which is a big assumption, given the nature of the emergency 1332 waiver being proposed). They anticipated using $220 million for premium subsidies, and $80 million for a reinsurance program, but as noted above, CMS clarified in October that the state wouldn’t get all of the pass-through funding, and the reduction in funding was estimated to be about 19 percent. A few other states have also proposed reinsurance programs (Oregon’s, Minnesota’s and Alaska’s have already been approved and implemented), but Iowa was the only one that sought full federal funding for it, rather than a combination of state and federal funding. In the letter that CMS sent to Iowa in October, the agency noted that Iowa would need to secure the necessary state funding to make up for the reduced federal funding they would have received if the waiver had been approved and implemented.
- Iowa’s proposed reinsurance program would have covered 85 percent of the cost of claims between $100,000 and $3 million, and 100 percent of claims above $3 million.
- Premium subsidies for the PSM Plan would have been based on age and 2017 income (it’s unclear if there would have been any mechanism for adjustments if a household’s 2018 income ends up being dramatically different from their 2017 income). They would have been in the form of flat monthly credits that would have been paid directly to the insurance company, varying from $24/month for a child with household income over 400 percent of the poverty level, to $828/month for a person age 55 or older with household income between 133 percent and 150 percent of the poverty level (below 133 percent of the poverty level, Medicaid is available). It’s noteworthy that people with income too high for ACA premium subsidies would have received premium subsidies under the Iowa plan, which would have been significant for the roughly 28,000 enrollees (as of 2017) who don’t receive any financial assistance with their premiums.
- Coverage would have been guaranteed-issue (ie, medical history would not be a factor) and would not have had lifetime or annual benefit limits. As with ACA-compliant coverage, people would only have been able to sign up during open enrollment or a special enrollment period. But in a deviation from ACA rules, people signing up during special enrollment periods (except for birth or adoption of a child) would have had to provide proof of continuous coverage over the past 12 months. This was an attempt to keep people from waiting until they’re sick to potentially seek out a qualifying event and “game the system” by enrolling at that point.
- PSP Plan policies would have been purchased directly from insurers (or with the help of brokers), rather than via HealthCare.gov. Premium subsidies would have been sent directly to insurers to offset the cost of coverage. It’s notable that there was a very tight timeframe for the state to implement a framework for all of this in just a few months before 2018 open enrollment begins in November (the urgency of the situation is the reason Iowa has requested a 14-day approval process for their waiver proposal).
There were various counties in a number of states — including Washington, Tennessee, Indiana, Kansas, Missouri, Wisconsin, Ohio, and Virginia — where no insurers initially filed plans for 2018 (or the only participating insurer had withdrawn its filed plans), but all of them were filled over the summer by other insurers or reversed withdrawal decisions. Ultimately, there were no areas of the country with “bare” spots in 2018. But Iowa’s waiver proposal was seen by some as a “just in case” template.
At the federal level, Senator Lamar Alexander (R, Tennessee) introduced S.761 in March, which would allow people to use ACA premium tax credits towards the purchase of off-exchange plans in areas where no exchange insurers offer coverage. The bill did not advance in 2017, but even if it were to be enacted, it would not be of use to people in an area — like most of Iowa if Medica hadn’t offer ACA-compliant plans — facing the possibility of no individual market insurers offering coverage on or off the exchange.
Another bill, S.1201, introduced in 2017 by Senator Claire McCaskill (D, Missouri), would have allowed people in areas without an exchange option to purchase the same coverage that members of Congress and their staffers buy, from DC’s small business exchange. McCaskill’s bill has also did not advance out of committee, and it ended up being a non-issue for 2018, since all areas of the country have exchange insurers offering plans in 2018.
Medica considered a market exit, but indicated they prefered to remain
Medica was the only insurer that offered exchange plans state-wide in Iowa in 2017, and there were 13 counties where they are the only insurer participating in the exchange. For 2018, they are the only insurer offering coverage anywhere in the state.
But on May 3, 2017, Medica released the following statement: “Without swift action by the state or Congress to provide stability to Iowa’s individual insurance market, Medica will not be able to serve the citizens of Iowa in the manner and breadth that we do today. We are examining the potential of limited offerings, but our ability to stay in the Iowa insurance market in any capacity is in question at this point.”
There is no doubt that the most pressing concern for insurers in terms of market stability at that point was the ongoing funding of cost-sharing subsidies, which had been an ongoing question mark throughout 2017 (the Trump Administration ultimately eliminated federal funding for cost-sharing subsidies in October 2017). The revised rate filing that Medica submitted in mid-August was based on the assumption that cost-sharing subsidies would not be funded, and the additional cost to cover them was loaded onto the cost of silver plans in the exchange (this makes premium subsidies much larger than they would otherwise have been, and has the effect of making coverage for subsidized enrollees less expensive than it was in prior years).
In Iowa, however, some of Medica’s concern could also have been related to the single very high-cost insured described in Wellmark’s 2017 rate filing. With Wellmark, Aetna, and Gunderson exiting, Medica becomes the insurer of last resort, and there isn’t currently an adequate risk-sharing mechanism for addressing claims like that, particularly in a market as small as Iowa’s. The state’s proposed 1332 waiver addressed the situation, but it was on a very tight timeframe for 2018 implementation, and Iowa found out just a few weeks before the start of open enrollment that they weren’t going to receive as much federal funding with their 1332 waiver as they had planned, so the state withdrew the waiver proposal and Iowa has continued with business as usual in their exchange for 2018.
On June 16, three days before rate filings were due in Iowa, Medica told CNBC that their “intent is to be in Iowa” for 2018. But they also noted that “until we have clarity on rules, we will not make a final call until we have that.” Ultimately, Medica did stay in Iowa’s exchange, despite the lack of clarity from the federal government.
Democratic lawmakers want to allow people to purchase Medicaid as an alternative to individual market coverage
In 2017, two Democratic lawmakers in Iowa informally proposed a public option that would allow people to purchase Iowa Medicaid, using ACA premium subsidies to offset some of the cost. The proposal had not yet been introduced as legislation at that point, but state Rep. John Forbes and Sen. Matt McCoy held a public meeting to discuss the possibility in June 2017. The 2018 legislative session in Iowa convened in January, and two bills — S.F.2035 and H.F.2002 — were introduced to create the “Health Iowans for a pubic option” program. But neither bill advanced out of committee by the February deadline (known as “the funnel”), rendering them effectively dead for the 2018 session.
It was already understood that a Medicaid buy-in program would face an uphill challenge in Iowa’s Republican-controlled legislature. And even if the legislation had succeeded in winning over Republican support in Iowa, it would also have needed approval from the Trump Administration.
Although no states currently allow residents who aren’t eligible for Medicaid to buy into the program, it’s an idea that’s gained at least a little traction in 2017. Lawmakers in Wisconsin were considering a similar measure, and Nevada lawmakers passed a measure during the 2017 legislative session that would have allowed state residents to buy into Nevada’s Medicaid program, but Governor Sandoval vetoed it.
The Iowa exchange and the Trump Administration
Although the future of the Affordable Care Act has been uncertain under the Trump Administration, nothing has changed for now. House Republicans passed the American Health Care Act in May 2017, but it did not pass in the Senate and was never enacted.
The Iowa Division of Insurance issued a statement after the House passed the AHCA, noting that the ACA has not worked well in Iowa, and expressing optimism about a new federal solution. It’s worth noting, however, that Iowa’s market would likely be in better shape if the state had stopped allowing grandmothered plans to continue (in Iowa, Wellmark’s decision to stay out of the exchange through 2016 meant that large numbers of the insurer’s healthy enrollees kept their grandmothered plans, leading to a less healthy risk pool for ACA-compliant plans).
The Trump Administration has taken some actions aimed at stabilizing the individual markets, but other actions have essentially served to destabilize the market. And the House v. Price (formerly House v. Burwell) lawsuit to determine the legality of the ACA’s cost-sharing subsidies created a great deal of uncertainty among insurers in 2017. The Administration’s use of cost-sharing reduction funding as a bargaining chip made insurers understandably nervous, and insurers across the country (including Medica in Iowa) added the cost of cost-sharing subsidies to their premiums for 2018, operating under the assumption that federal funding would be eliminated (which did turn out to be the case, as of October 2017).
This uncertainty, combined with significant losses, led to Wellmark, Aetna, and Gunderson opting to exit the ACA-compliant individual market at the end of 2017.
HHS reported that from 2010 to 2015, the number of Iowa residents with health insurance grew by 132,000 as a result of the ACA — a number that has continued to climb since 2015, largely due to Medicaid expansion. Total net Medicaid enrollment in Iowa grew by 128,556 people from 2013 through December 2016.
51,573 people enrolled in private plans through the Iowa exchange during the 2017 open enrollment period (November 1, 2016 through January 31, 2017). That’s a little more than a 6 percent decline from the 2016 open enrollment period, when 55,089 Iowa residents enrolled.
Across all the states that use HealthCare.gov, enrollment dropped by about 5 percent in 2017. This is due in part to the uncertainty surrounding the future of the ACA, and the Trump Administration’s move to cut back advertising and outreach in the final week of 2017 enrollment.
By February 2017, effectuated enrollment in Iowa’s exchange stood at 46,519. Of those, 87 percent were receiving premium subsidies, and 53 percent were receiving cost-sharing subsidies.
HHS estimated that there were 41,000 people in Iowa with off-exchange coverage in 2016 who would be eligible for subsidies if they switched to the exchange. And Kaiser Family Foundation data indicated that just 20 percent of eligible Iowa residents had enrolled in coverage through the exchange by 2016, the lowest percentage in the country. That may be due in part to the lack of marketing for the exchange in the state, or the fact that Wellmark sat out the first three years of exchange operation (they’re offering exchange plans in 2017; details below).
UnitedHealthcare exited at the end of 2016
In November 2015, UnitedHealthcare announced that they were experiencing significant financial losses in the exchanges, and that they weren’t certain whether they would continue to sell plans in the exchanges after the end of 2016. In April 2016, they confirmed that they would exit most of the 34 exchanges where they offered plans in 2016.
Iowa is one of the states where UnitedHealthcare exited the individual market (on and off-exchange) at the end of 2016. According to The Gazette, there were about 9,000 people who needed to secure new coverage during the 2017 open enrollment period. That included 8,700 Iowa residents who had coverage through UnitedHealthcare of the Midlands Inc. and 328 people who had coverage through UnitedHealthcare Life Insurance Co.
In 2016, United offered plans in 76 of Iowa’s 99 counties, and in 71 of those counties, United offered at least one of the two lowest-cost silver plans in the exchange. In 66 counties, the benchmark plan for a 40-year-old would have been between $25 and $100/month more expensive in 2016 if United hadn’t participated. However, the impact of United’s exit is likely to be buffered by the fact that Wellmark has joined the exchange in 2017.
United exited the SHOP (small business) exchange in Iowa, but is continuing to offer small group plans outside the exchange. The company is not offering plans in the Iowa individual market at all in 2017, including outside the exchange.
2017 rates and carriers
Four carriers are offering on-exchange plans in Iowa for 2017. But Medica is the only carrier offering exchange plans in all 99 counties in Iowa. In 13 of the state’s counties, Medica is the only carrier offering plans in the exchange.
According to the Iowa Insurance Division, the following average rate increases were approved for carriers that are offering exchange plans in 2017:
- Aetna (formerly Coventry): 22.58 percent; Aetna had roughly 42,000 policyholders in Iowa in 2016.
- Gunderson (merging with Unity Health Insurance): 19.8 percent; Gunderson had 88 policyholders in 2016. Their 2017 Iowa plans are available only in four counties in the northeast corner of the state (Allamankee, Clayton, Fayette, and Howard).
- Medica: 19 percent; Medica had 1,367 policyholders in 2016.
- Wellmark (new to the exchange for 2017, but exiting the ACA-compliant individual market at the end of 2017): Average rate increase for 2017 was 42.6 percent for existing Bronze and Silver PPOs, and 37.8 percent for HMOs. There were about 7,800 policyholders with Wellmark’s HMOs in 2016, and about 22,000 policyholders who had plans for which the average 42.6 percent rate increase applied. All of them had off-exchange plans in 2016, but were able to transition to Wellmark’s on-exchange plans in 2017 if they so chose.
Aetna is not offering exchange coverage in 2017 in most of the states where they participated in 2016. But they’re continuing to offer coverage in the exchanges in four states, including Iowa (the others are Delaware, Nebraska, and Virginia). At the end of 2017, they are exiting Iowa’s individual market, although they have not said what they plan to do in the other three states.
Avera did not offer health insurance in the Iowa exchange in 2016 (their plans were all off-exchange), but they had initially filed rates for on-exchange plans to be available in 2017. That’s no longer the case however, and their individual market plans are now only available in South Dakota (they are continuing to offer small group plans in Iowa).
The Iowa Division of Insurance held public hearings about the proposed rates in late July, and consumers expressed their frustration with the size of the proposed rate hikes. But Insurance Commissioner Nick Gerhart noted that there was little the state can do to reign in rate increases if they’re justified by medical spending. Iowa regulators do not have the authority to reject rate increases outright, but can negotiate with carriers. Ultimately, the rates were approved as-filed for 2017.
For people enrolled in plans through the exchange and willing to shop around during open enrollment, premium subsidies mitigate much of the rate increase for the majority of Iowa exchange enrollees who receive subsidies (in 2016, 87 percent of Iowa exchange enrollees were receiving subsidies). Premium subsidies are available in 2017 for the first time for Wellmark enrollees, as long as they switched to a Wellmark plan offered through the exchange. And subsidies are significantly larger in 2017 than they were in 2016, since the average benchmark plan (second-lowest-cost silver plan, upon which subsidy calculations are based) is 25 percent more expensive in 2017.
55,089 people in Iowa enrolled in private plans through the exchange during the 2016 open enrollment period, including renewals and new enrollees. For perspective, during the 2015 open enrollment period, 45,162 people enrolled in private plans through the exchange in Iowa.
2016 average premiums
Kaiser Family Foundation data indicates that there were still 188,000 uninsured residents in Iowa in 2015, and 47 percent of them were eligible for the state’s expanded Medicaid coverage. Another 16 percent were eligible for subsidies to help purchase private health insurance coverage, as long as they buy a plan through the Iowa exchange.
Of the people who initially enrolled in plans through the Iowa exchange for 2016, 85 percent were eligible for premium subsidies. Their pre-subsidy premium averaged $425/month (a little higher than the $396/month average across all Healthcare.gov states), but their average after-subsidy premium was just $122/month (also a little higher than the $106/month average across all Healthcare.gov states).
For comparison, 85 percent of enrollees also qualified for subsidies in 2015 in the Iowa exchange, but their average pre-subsidy premiums were $371/month, and their average after-subsidy premiums were $111/month.
By March 2016, 87 percent of Iowa exchange enrollees were receiving subsidies that averaged $307 per month.
Consumers had more choices in 2016
The Iowa Insurance Division announced in May 2015 that five carriers had submitted proposals to sell individual coverage in the exchange for 2016 — up from one that offered plans in 2015. Ultimately, four carriers offered exchange plans in Iowa in 2016.
Early in the 2015 open enrollment period, Coventry and CoOpportunity Health both offered plans in the Iowa exchange. But CoOportunity stopped offering policies in late December 2014. CoOportunity was a CO-OP health insurer formed with funding through the Affordable Care Act. CoOpportunity got into financial difficulty after higher than expected enrollment and claim costs in 2014, and was subsequently liquidated, leaving Coventry as the only marketplace insurer available in Iowa.
But for 2016, Coventry and Medica offered plans state-wide, while two other carriers offered plans in select areas. United Healthcare of the Midlands, and Gunderson offered plans in various areas of the state (although that chart indicates that Avera was also offering plans in the Iowa exchange in 2016, Avera’s 2017 rate filing memo (which has since been deleted, since they’re not offering individual market coverage in Iowa in 2017) noted that they did not participate in the exchange in 2016, and Avera’s website also confirmed that Avera plans were not available in the Iowa exchange in 2016).
Two additional carriers offered small group plans through the exchange in 2016.
For the three carriers that offered individual health insurance in 2015 (two of which were off-exchange only), the approved average rate changes for 2016 were:
- Wellmark = 17.6 to 28.7 percent increases, across ACA-compliant, transitional, and grandfathered plans. (137,000 members, OFF-EXCHANGE ONLY; rate hike for ACA-compliant off-exchange plans is 24.5 percent)
- Coventry = 19.8 percent increase (47,000 members)
- Gunderson = 9.4 percent (60 members, all off-exchange in 2015, but on-exchange plans are available in 2016)
At ACAsignups, Charles Gaba put the weighted average rate increase market-wide at a little over 22 percent. But for people who already had a plan through the exchange, it was 19.8 percent, since those plans were all from Coventry.
However, the average benchmark premium increased by 12.8 percent in Iowa, which was less than the overall average rate increase for on-exchange plans (in Cedar Rapids, the average benchmark premium is 15.4 percent more expensive in 2016). The benchmark plan is just the second-lowest-cost Silver plan in each area – it’s not necessarily the same plan from one year to the next, or even from the same carrier. Iowa is a good example of a new carrier taking over the benchmark position in at least some areas of the state.
With the addition of new carriers and plans in the Iowa exchange, it was extremely important for 2015 enrollees to shop around during open enrollment for 2016 plans. Subsidies are higher in 2016 than they were in 2015, but the increase in subsidies isn’t enough to fully offset the average rate increases on Coventry plans for 2015 enrollees who let their coverage auto-renew.
More than 45,000 Iowans singed up for qualified health plans during the second open enrollment period. While an improvement over 2014, the 2015 total was just 20 percent of the estimated 225,000 Iowans who were eligible to sign up on HealthCare.gov. Nationally, about 40 percent of those eligible actually enrolled during the 2015 open enrollment period.
And as expected, not everyone who enrolled ended up keeping their coverage. Some people never paid their initial premium, and others cancelled their coverage early in the year for one reason or another. By the end of June+, there were 39,347 people with in-force coverage through the Iowa exchange.
Iowa expanded Medicaid under the ACA, but with a waiver that called for using Medicaid funds to purchase private health plans for eligible residents. But in June 2015, the state announced that they were abandoning their alternative “private option” for Medicaid expansion, and switching Medicaid enrollees to regular Medicaid managed care plans instead. The switch to managed care was initially scheduled for January 2016, but was pushed back to March 2016.
Iowa’s uninsured rate decreased 3.1 percentage points, from 8.1 percent in 2013 to 5 percent in 2014 according to U.S. Census Bureau data. Iowa’s Medicaid/CHIP enrollment grew by 25 percent – about 125,500 people – from 2013 to August 2016, which is no doubt a significant factor in the reduction in the uninsured rate.
2015 premiums up 11 percent on average
A study by The Commonwealth Fund found that 2015 marketplace premiums in Iowa increased by 11 percent on average compared to 2014. The Commonwealth Fund’s study was weighted for differences in premiums between urban/suburban/ rural areas and insurer participation.
2014 enrollment metrics
In total, 29,163 people enrolled in qualified health plans (QHPs) during the 2014 open enrollment, and an additional 36,891 people qualified for Medicaid or the Children’s Health Insurance Program (CHIP).
Just 11.1 percent of Iowa residents eligible to enroll through the marketplace did so in 2014. Iowa tied with neighboring South Dakota for the lowest percentage of eligible enrollees signing up. A Kaiser Health News article attributed the low enrollment in both states to Wellmark Blue Cross & Blue Shield’s decision against participating in the states’ marketplaces rather than a boycott of the Affordable Care Act. In addition, the fact that transitional (pre-2014) plans were allowed to renew meant that overall enrollment in ACA-compliant plans was lower than expected.
A U.S. Department of Health and Human Services report showed the 2014 average, post-subsidy premium for Iowa consumers was $108 per month. The national average in states using HealthCare.gov $82 per month after subsidies. In 2015, the average after-subsidy premium in Iowa increased to $117 per month, and the national average increased to $105 per month (in the 37 states that used Healthcare.gov in 2015). It’s worth noting, however, that variations in after-subsidy premium are a function of income and plan selections – in an area where people have higher average household incomes, average after-subsidy premiums will be higher. That will also be the case in an area where people gravitate to more comprehensive plans. The ACA’s subsidies ensure that for people with equal income, the second-lowest-cost silver plan will be the same price in every area of the country (the exception is areas where the second-lowest-cost silver plan is actually priced so low that subsidies aren’t necessary in order to ensure that the plan isn’t more than the percentage of income cap imposed by the ACA).
Twenty-six percent of Iowa residents selected a bronze plan (20 percent nationally), 57 percent selected a silver plan (65 percent nationally), 12 percent selected a gold plan (9 percent nationally), 4 percent selected a platinum plan (5 percent nationally) and 2 percent selected a catastrophic plan (2 percent nationally). Twenty-six percent of Iowa enrollees were between the ages of 18 and 34.
Iowa’s approach to the marketplace
Iowa operates a partnership exchange with the federal government. The state has occasionally mentioned as a state that may transition to a different model for its exchange. In February 2014, Gov. Branstad floated the idea of a regional exchange in conjunction with South Dakota, Nebraska and Kansas. Bills to convert to a state-run exchange were introduced in Senate committees in both 2013 and 2014, but neither advanced. And as time goes by, it becomes less likely that the state will branch out into its own exchange, or create a regional exchange, due to the start-up costs.
Iowa health insurance exchange links
State Exchange Profile: Iowa
The Henry J. Kaiser Family Foundation overview of Iowa’s progress toward creating a state health insurance exchange.
Consumer Advocate Bureau
Provides consumers with assistance in navigating the health care system, assistance programs, and other issues related to health insurance benefits.
1-877-955-1212 / email@example.com
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.