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Iowa health insurance marketplace: history and news of the state’s exchange

Wellmark rejoined the exchange for 2019, so two insurers are offering plans statewide

Highlights and updates

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. And in 2018, Iowa did not receive any navigator grants at all.

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 4.7 percent in 2017, according to U.S. Census Bureau data. Iowa’s Medicaid/CHIP enrollment grew by 38 percent —nearly 189,000 people — from late 2013 to late 2018, which is no doubt a significant factor in the reduction in the uninsured rate.

Enrollment in Iowa’s exchange

Open enrollment for 2019 plans ran from November 1, 2018 to December 15, 2018. During that window, 49,210 people enrolled in private plans through the Iowa exchange. That was a drop of about 7.5 percent from the 53,217 people who had enrolled during open enrollment for 2018 coverage.

In the majority of the states that use HealthCare.gov, enrollment peaked in 2016 and has declined each year since then. In Iowa, enrollment did peak in 2016, and although it declined in 2017, it rose again in 2018, although not to the level it had reached in 2016. Here’s a summary of how enrollment has changed over the years in Iowa’s exchange:

  • 29,163 people enrolled for 2014. This was lower than expected, and a Kaiser Health News article attributed the low enrollment to Wellmark Blue Cross & Blue Shield’s decision against participating in the Iowa marketplace. 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.
  • Enrollment grew significantly for 2015, with 45,162 people enrolling in Iowa exchange plans.
  • Enrollment grew sharply again in 2016, with 55,089 people purchasing plans during open enrollment.
  • Enrollment declined about 6 percent for 2017, when 51,573 people enrolled during the open enrollment period. [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.]
  • 53,217 people enrolled during the open enrollment period for 2018, but attrition was significant. 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 had left Iowa’s ACA-compliant individual market for 2018. Although the ACA’s individual mandate penalty was still in effect for 2018, an exemption was available to anyone for whome the lowest-cost bronze plan would cost more than 8.05 percent of household income; this likely applied to many of the people who left the unsubsidized market at the end of 2017. By November 2018, total enrollment in ACA-compliant individual market plans (including on- and off-exchange plans) in Iowa had dropped to 39,000 people. Virtually all of those individuals had on-exchange coverage, as the off-exchange ACA-compliant market in Iowa appeared to have dwindled to almost no enrollees. Notably, Iowa still had 68,000 people enrolled in individual market grandmothered and grandfathered plans at that point. Those pre-ACA plans still exist in other states as well, but they don’t comprise the bulk of any other state’s entire individual insurance market. The fact that so many people in Iowa — who were healthy enough to purchase medically underwritten coverage prior to 2013 or 2010 — is part of the reason the state’s ACA-compliant risk pool is so expensive.

Kaiser Family Foundation data indicated that as of 2018, just 17 percent of eligible Iowa residents had enrolled in coverage through the exchange, the lowest percentage in the country (nationwide, the average was 34 percent at that point). The lower-than-expected enrollment may have been 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 began offering exchange plans in 2017, exited for 2018, but then returned in 2019).

Wellmark and Medica offering plans in 2019 (plus a look at insurer participation in Iowa’s exchange since 2014)

In 2014, plans were available in Iowa’s exchange from Aetna (Coventry), Avera, CoOpportunity, and Gunderson. Coventry and CoOpportunity offered plans statewide, while Gunderson’s plans were only available in five northeastern counties and Avera’s plans were only available in nine northwestern counties.

Early in the open enrollment period for 2015 plans, Coventry and CoOpportunity Health both offered plans statewide in the Iowa exchange, and Avera and Gunderson continued to offer plans in the northern corners of the state. But CoOportunity stopped offering policies in late December 2014 (CoOpportunity had stopped offering private plans to Medicaid expansion enrollees as of November, and their 9,700 members in that program had transitioned to Iowa’s fee-for-service Medicaid program instead). 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 most of Iowa.

Avera did not offer health insurance in the Iowa exchange in 2016 (their plans were all off-exchange). But Medica joined the exchange state-wide (Aetna/Coventry continued to offer plans statewide), and UnitedHealthcare began offering exchange plans in most of the state. Gunderson continued to offer plans in just the northeast corner of the state.

UnitedHealthcare’s participation in Iowa’s exchange was short-lived however, as they exited at the end of 2016 (as was the case in most states where they offered exchange plans). In 2016, United had 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 was buffered by the fact that Wellmark joined the exchange in 2017.

Avera’s initial rate filing for 2017 indicated that they would return to the exchange for 2017. They ultimately reversed course, however, and did not return to the Iowa exchange (as of 2019, their individual market plans are still only available in South Dakota). But Iowa’s exchange still had four insurers participating in 2017, as that was the year that Wellmark finally joined the Iowa exchange (Wellmark had long been the dominant insurer in Iowa’s individual market, but had avoided the exchange for the first three years). Medica was the only carrier offering exchange plans in all 99 counties in Iowa, and in 13 of the state’s counties, Medica was the only carrier offering plans in the exchange. Aetna, Wellmark, and Gunderson all offered plans in select areas of the state. [Aetna had stopped offering exchange coverage in 2017 in most of the states where they participated in 2016. They continued to offer coverage in the exchanges in four states, including Iowa (the others were Delaware, Nebraska, and Virginia). But at the end of 2017, they exited the individual market in all four of those states.]

For 2018, Medica continued to offer plans statewide in Iowa’s exchange, but Wellmark, Gunderson, and Aetna all left the exchange at the end of 2017. So Medica was the only option for Iowa residents who wanted on-exchange plans in 2018.

For 2019, Wellmark rejoined the exchange and began offering plans statewide (in part because they were allowed to partner with Farm Bureau to sell medically underwritten plans outside the exchange; details below). So all exchange enrollees in Iowa had a choice between Medica and Wellmark for 2019 coverage.

Lower premiums in 2019, plus a look back at premium changes over the years

Open enrollment for 2019 individual market health plans ended on December 15, 2018. However, Iowans with qualifying events may still be able to enroll in ACA-compliant coverage.

Medica and Wellmark are both offering plans statewide in Iowa’s exchange, with Wellmark rejoining the exchange after previously only offering plans in the exchange for one year, in 2017.

Medica was the only insurer in Iowa’s exchange in 2018. But for 2019 coverage, the Iowa Insurance Division announced in June that both Wellmark and Medica had filed plans to offer statewide coverage in the exchange. Medica already offered plans statewide, but they’ve expanded their coverage offerings in some areas of the state for 2019.

Wellmark had joined Iowa’s exchange in 2017, so 2019 is their second year offering exchange plans. But in 2017, Wellmark’s plans were only available in 40 of the state’s 99 counties. So their statewide coverage offerings in 2019 are an expansion over what they were offering prior to their exit from the ACA-compliant market

  • Medica: Average rate decrease of 9 percent, although it varies by plan. The average rate increase is very small for Medica Insure and Medica with CHI Health, although rates for Inspire by Medica are decreasing by an average of more than 16 percent.
  • Wellmark: No applicable rate change, as there were no ACA-compliant Wellmark plans in Iowa’s individual market in 2018.

Under HIPAA [see 42 USC 300-gg-42(b)(2)], an insurer that entirely exits the individual market in a particular state cannot re-enter that state’s individual market for five years. But Wellmark did not discontinue their grandfathered and grandmothered individual market plans in Iowa in 2018, so their exit from the ACA-compliant individual market did not constitute a full exit from the individual market in the state. As such, there was nothing preventing them from re-entering that segment of the market in 2019.

Iowa law requires the state to hold a public hearing for proposed rate increases that exceed the average annual health spending growth rate. CMS clarified that was 5.6 percent for 2019, so a public hearing would have been held in August if Medica had proposed a rate increase of more than 5.6 percent (Wellmark did not have an applicable rate increase for 2019, as they did not offer any ACA-compliant individual market plans in 2018). But Medica decreased their rates for 2019, so there was no public hearing for ACA-compliant plans (public hearings were held, however, for the proposed rate increases for grandfathered and grandmothered individual market plans issued by Golden Rule and Wellmark. There were 3,379 people with grandfathered and grandmothered Golden Rule plans for which the insurer proposed an average rate increase of 11 percent. And Wellmark proposed an average 2019 rate increase of 8.1 percent for 63,500 Iowa residents who had grandmothered and grandfathered plans in 2018).

For perspective, here’s a look back at average rate changes in Iowa’s exchange over the years:

  • For 2015 plans, A study by The Commonwealth Fund found that 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.
  • For 2016 plans, the approved average rate changes for 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 was a good example of a new carrier taking over the benchmark position in at least some areas of the state.

  • For 2017 plans, four insurers offered plans in Iowa’s exchange with the following average approved rate increases (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):
    • Aetna (formerly Coventry): 22.58 percent; Aetna had roughly 42,000 policyholders in Iowa in 2016.
    • Gunderson (merged with Unity Health Insurance for 2017): 19.8 percent; Gunderson had 88 policyholders in 2016. Their 2017 Iowa plans were 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 then exited 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.

     

  • For 2018 plans (offered only be Medica), average rates increased by nearly 57 percent. In the spring of 2017, Iowa was one of just a few states facing the most uncertain market conditions for 2018. Initially, it wasn’t clear that there would be any filers, but ultimately, Medica did file plans for statewide coverage in Iowa in 2018.Medica’s 56.7 percent average rate increase was larger than they had initially filed, and was 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.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. The Iowa Division of insurance reported in early 2018 that nearly everyone who wasn’t subsidy-eligible had left the individual market.

Benchmark premiums are higher, so subsidies are larger and there are more bargain-priced plans available in 2019

For enrollees who had coverage through Iowa’s exchange in 2018 (all of whom had Medica plans), average pre-subsidy premiums decreased by 9 percent in 2019. But the average benchmark premium in Iowa is 6.5 percent higher in 2019. Premium subsidies are based on the cost of the benchmark plan, so subsidies get larger when benchmark premiums increase. Due to the larger subsidies, there are a lot more bargain-priced plans (including free plans for some enrollees) in Iowa for 2019 than there were in 2018.

In 2018, Medica only offered one silver plan in Iowa. So the benchmark plan was the only silver plan (as opposed to the second-lowest-cost silver plan). Enrollees in 2018 could choose from among three bronze plans, one silver plan, and one gold plan.

But for 2019, there are more options available from Medica, and Wellmark is also offering plans. With multiple silver plans available, there’s a new benchmark plan in many areas of the state. And if it’s priced higher than the solitary silver plan was priced in 2018, premium subsidies are larger to accommodate the higher benchmark premium.

Some examples help to illustrate how this works. Let’s consider a 40-year-old enrollee who earns $30,000/year. We’ll say that this person is 40 years old in both 2018 and 2019, so that we can compare apples to apples without considering the price increase that happens each year based on the person being a year older. We’ll consider how this person would fare in the exchange if they lived in Des Moines, Cedar Rapids, and Davenport:

In Des Moines, this enrollee could have picked from among five plans in 2018. After his $455/month premium subsidy was applied, he would have paid a minimum of $78/month for his coverage, and a maximum of $275/month, depending on the plan he picked. For 2019, the plan that was the benchmark in 2018 has dropped in price (from $656/month to $570/month, before subsidies). But there are now multiple silver plans available, and they cost more than that one. The second-lowest-cost silver plan is $713/month, which results in a subsidy of $507/month for this applicant. There are 13 plans available, and due to the higher subsidy amount, four of them are entirely free for this applicant — they have $0 premiums. Another four plans have monthly premiums below $50 (keep in mind that in 2018, the cheapest plan this person could get was $78/month). One of those plans is a gold option that only costs $7/month and has a deductible of only $750.

In Cedar Rapids and Davenport, the situation is similar: Our 40-year-old earning $30,000 could select from five plans in 2018, ranging in price from $69/month to $280/month (after the subsidy was applied). But in 2019, he can pick from among four $0 plans, and several others are under $50/month, including a gold plan for $11/month.

In both years and in all three locations, the after-subsidy benchmark price is just about the same: $201/month in 2018 and $206/month in 2019 (the percentage of income that people have to pay for the benchmark plan is slightly higher in 2019). But the plan that occupies the benchmark spot is different, and there are more plans available. And since the new benchmark plans are more expensive (pre-subsidy) than the prior year’s benchmark plans, subsidies are bigger and there are plans available with after-subsidy rates that are much lower than they were in 2018.

Note that this is not always the case when new insurers join an exchange. The Phoenix, Arizona area is a perfect example of the opposite scenario: New insurers joined for 2019, but their silver plan rates are lower than the 2018 benchmark plan’s rates, so premium subsidies are quite a bit smaller in Phoenix for 2019, and after-subsidy premiums for plans that aren’t the benchmark are higher than they were in 2018.

Iowa enacts legislation that allows Farm Bureau to partner with Wellmark to sell non-ACA-compliant plans outside the exchange

The Iowa Insurance Division announced on November 1, 2018 that “a non-insurance health benefit plan sponsored by the Iowa Farm Bureau, a non-profit agricultural organization, also begins enrollment today.” That’s referring to the new Farm Bureau plans that are allowed as a result of legislation that Iowa enacted in 2018. These plans have frequently been referred to as “junk insurance” in the media, but that’s not really the case. They’re less expensive than ACA-compliant plans, but that’s mostly due to the fact that they use medical underwriting.

The coverage itself is similar in many respects to ACA-compliant plans, although there’s a lifetime benefit cap of $3 million, whereas ACA-compliant plans don’t have any benefit caps for essential health benefits. But unlike ACA-compliant plans, which cover pre-existing conditions and have to accept all applicants during open enrollment, regardless of medical history, eligibility for Farm Bureau plans is based on an applicant’s medical history (this is how it worked in the individual market in most states prior to 2014). Farm Bureau plans will accept enrollees year-round, as long as they can pass the company’s medical underwriting.

It’s interesting that the Iowa Insurance Division refers to the Farm Bureau plans as “a non-insurance health benefit plan” (which is due to the way the state structured its legislation to allow these plans — they’re not regulated by the state as insurance; this means enrollment in them would have triggered the ACA’s individual mandate penalty prior to 2019, but that penalty no longer applies in 2019 and beyond), and yet one of the plans that Farm Bureau is offering is an HSA-qualified plan that will allow an enrollee to contribute to a health savings account. So as far as the IRS is concerned, the high-deductible health plan that Farm Bureau is offering is certainly a real health insurance product. But the state is not regulating it as such.

After facing the highest pre-subsidy premiums in the country in 2018, Iowa lawmakers were understandably focused on finding ways to reduce health insurance premiums. But they focused on the premise that the best approach to lowering health insurance premiums would be to allow healthy people the opportunity to buy lower-quality plans at a lower price (despite the fact that the long-term effect of this could be to drive premiums even higher in the ACA-compliant market, as an exodus of healthy people leaves a sicker risk pool). Iowa SF2329 and HF2364 were introduced in February 2018 in an effort to allow the Iowa Farm Bureau to sell plans that would not be considered insurance and therefore not subject to insurance regulations. 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 was 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 was 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. And you don’t have to be a farmer to participate, as Farm Bureau membership is available to anyone in Iowa, for an annual fee of $55 or less (this is much different from the approach that Farm Bureau has taken in Nebraska, where the Farm Bureau plans are set up under association health plans rules, are only available during an annual open enrollment period, and can only be purchased by people involved in farming — but in Nebraska, the Farm Bureau plan does not use medical underwriting).

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 allows 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 was the sole insurer offering plans in Iowa’s exchange in 2018, was opposed to the legislation, as it specifically benefits a competitor, while potentially destabilizing the ACA-compliant market that Medica was already serving.

The fiscal note for SF2349 clarified that the coverage would be self-funded by Farm Bureau, with the insurer (Wellmark) serving as a third-party administrator, rather than the risk-bearing entity. The target market for the Farm Bureau plans is people who 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 estimated that about 4,000 people who had ACA-compliant coverage in Iowa in 2018 (and who were paying an average of $17,000 in annual premiums) would switch to Farm Bureau plans.

Farm Bureau plans will only appeal to healthy consumers, and likely to those on the younger end of the age spectrum, because they are medically underwritten. Since they aren’t regulated as health insurance, they can 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 can include price variation based on things like medical history and gender).

In a February 2018 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 supported the Farm Bureau measure, and partnered with Farm Bureau to administer the new health plans.

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 was 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 was paying at least $27,000/year in premiums for that cheapest bronze plan if their income exceeded 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 had already left the individual market, an estimated 4,000 people were expected to be siphoned off from the existing ACA-compliant insurance pool, particularly among young, healthy people. That would serve to further weaken the insurance pool in Iowa.

[Although for 2019, despite the Farm Bureau plans and the elimination of the individual mandate penalty for people who enroll in plans like the Farm Bureau option, Medica ended up reducing their premiums. So for the time being, the market in Iowa appears to be much more stable than it was a year ago, despite the debut of the Farm Bureau plans.]

Iowa has faced a dire situation for people who aren’t eligible for premium subsidies, which could be helped with a state-based reinsurance program. 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.

The elimination of grandmothered plans would have helped to stabilize the individual market, as the healthy people on those plans (all of whom got through the medical underwriting process between 2010 and 2013) would have transitioned to the ACA-compliant risk pool. But Iowa has gone along with the federal guidelines that have allowed grandmothered plans to continue to renew. When Iowa regulators announced in April 2019 that grandmothered plans would be allowed to renew again for 2020, their bulletin included a sharp rebuke of the ACA.

Governor vetoed legislation that would have allowed sole proprietors to purchase small group health insurance

In May 2018, Iowa lawmakers passed SF2316, with unanimous support in both chambers. Among other things, the legislation would have allowed sole proprietors to purchase coverage in the small group health insurance market (as opposed to the individual market), even if they didn’t have any employees besides themselves. Governor Kim Reynolds noted that although she was supportive of the main premise in the bill (allowing domestic stock insurance companies to divide into two or more domestic stock insurers), she could not support the provision that would have allowed sole proprietors without employees to purchase small group coverage.

Reynolds vetoed SF2316, stating that allowing self-employed people without employees to buy small group health insurance “would further destabilize Iowa’s health insurance market. Further, the proposed changes conflict with federal law.”

It’s true that federal law, under the ACA, defines a small group as having two or more W-2 employees who aren’t married to each other. But Virginia recently enacted legislation (strongly upheld by the Virginia Bureau of Insurance) that allows sole proprietors without employees to purchase coverage in the small group market.

Iowa’s governor felt that a similar provision in Iowa would have been in conflict with federal rules, and she ostensibly was concerned about market destabilization. So self-employed people in Iowa without employees continue to only be able to purchase coverage in the individual market. But as noted above, healthy Iowans who purchase their own coverage also now have the option of buying non-ACA-compliant Farm Bureau plans instead of ACA-compliant individual market plans.

There the introduction of the Farm Bureau plans could also further destabilize Iowa’s ACA-compliant individual market, since healthy people who don’t get premium subsidies will flee the ACA-compliant market and opt for lower-quality, medically underwritten Farm Bureau plans, leaving the ACA-compliant market with a sicker, smaller risk pool.

If small group plans had been made available to sole proprietors, the plans would still have been fully compliant with the ACA, since the same ACA provisions apply to both the individual and small group markets. It’s true that allowing sole proprietors to have access to the small group market (which has year-round enrollment) would have a destabilizing effect on the small group market. It’s worth noting, however, that Governor Reynolds was willing to enact the Farm Bureau legislation, which could destabilize the individual market, in order to expand access to non-ACA-compliant coverage. But she was unwilling to enact legislation that would have had a destabilizing effect on the small group market, but which also would have expanded access to ACA-compliant small group coverage.

Wellmark rejoins the exchange in 2019, and partners with Farm Bureau to sell non-compliant plans outside the 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 is offering exchange coverage statewide in Iowa in 2019. Their 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 (the Wellmark Value Health Plan is available statewide in 2019).

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’ was a nod to Iowa SF2329, which was ultimately enacted in 2018 and allowed Farm Bureau to partner with Wellmark to sell non-ACA-compliant plans outside the exchange in Iowa, much like the Farm Bureau plans that are sold in Tennessee.

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 withdrew their ambitious 1332 “Stopgap Measure” waiver that would have radically changed the individual market

Although Medica ended up offering exchange plans statewide in Iowa in 2018, 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 2020. 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, and although it decreased again in 2019, premiums also decreased in 2019, which is a sign of improving market stability.

Ommen’s comments in September 2017 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 in 2017 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. Several other states have also proposed reinsurance programs (Oregon’sMinnesota’s and Alaska’s were already up and running in 2018, and WisconsinMaineMaryland, and New Jersey began operating reinsurance programs in 2019), 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 offered 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.

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 been gaining traction in recent years in several states.

Iowa health insurance exchange links

HealthCare.gov
800-318-2596

Iowa Insurance Division: State Partnership Exchange Plan Management

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 / consumer.advocate@iid.iowa.gov


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.