Iowa stopgap measure shows that some will just fall through the cracks… or they don’t

Newsplaining Column: On June 21, I wrote a column praising the Iowa Insurance Division (IID), for it’s initiative in designing a makeshift health insurance market for the nearly 70,000 Iowans that could to lose coverage, due to the mass exodus of insurance companies available on the Affordable Care Act (ACA) exchanges.

In the absence of customers in the market because of no insurance products at the market, ACA subsidies will not be received by the people in Iowa who cannot buy health insurance. This creates a dilemma in two ways: a) people don’t have access to health insurance, and b) insurance companies desperately rely on the tax credits to turn a profit in the ACA mandated exchanges, because they are guaranteed payments. No tax subsidies means that insurance companies have to jack up premiums, meaning less people enroll in healthcare, resulting in insurers leaving the market, and so on, and so on — the dreaded death spiral.

The IID has submitted a waiver to the Trump Administration, known as a “1332 Waiver,” which allows states to set up their own healthcare insurance systems that run parallel to ACA, as long as certain parameters are met: the number of uninsured persons can’t increase under the new plan, the plan can’t reduce the quality of benefits and can’t increase the cost of insurance for consumers, or the government — increasing the federal debt.

IID’s proposal is to, rather than forgo the subsidies that consumers would have had on a healthy insurance market, request those funds directly from the federal government, giving the State of Iowa all the money to set up its own insurance system. The IID says that it will create a standardized “silver” level plan (insurance companies rank their insurance packages from least coverage to most coverage — bronze, silver, gold, platinum) that any insurance company — even Wellmark Blue Cross Blue Shield and Aetna, who previously said they will leave the exchanges in 2018 — can sell, and will receive direct subsidies from the State of Iowa.

The nearly $352 million in subsidies, according to IID, will be allocated differently from the federal government, primarily that the subsidies will be flat, based on income and age. This means that anyone in an age group will get the same amount of money, with a slight influence based on one’s annual income. IID has said that it will incentivize younger persons (21-34) by offering them higher premiums to get them into the market (between $200-$300, per month).

In addition, the plan asked for more funds to update the state’s re-insurance program, in which insurance companies are reimbursed for individuals that rack up more than $100,000 in costs, annually. The proposal would guarantee that companies receive a minimum of 85 percent of the money they’re owed (up to $3 million). For patients that cost over $3 million, the program would guarantee 100 percent of the costs.

Since that June column, Iowa has garnered a generous amount of interest from other states, as well as media attention from places such as the Wall Street Journal and the Washington Examiner. According to Vox.com, Iowa’s 1332 waiver offers the Trump Administration a way to change America’s insurance system through legislative interpretation, circumventing the legislative guardrails in the congress. While there are written parameters to what makes a state’s healthcare system “acceptable” in ACA, the Trump Administration can decide what the ACA meant in its definitions of success.

In that June column I said that I supported the IID’s plan because of “… a generous subsidy, especially for those who are young and were pushed out of the market because of high premiums; there’s guaranteed payouts if the unmentionable happens, resulting in over $100,000 in medical costs and you have insurance.” I also explained why this plan works for insurers, saying, “… with no “market” to compete in, there’s virtually no risk. With the state delivering the subsidy money, especially to more young Iowans, as well as being guaranteed a minimum 85 percent of the costs in coverage … this is a great idea in making sure Iowans have coverage at a profitable rate for companies.”

With more attention however, and more fine details being drawn out, I’m not so sure I fully support the IID’s stopgap plan. According to the Washington Examiner, Iowa is still expected to have between 4,000 and 6,000 people in the state become uninsured because of the subsidy payout, in addition to lack of insurers and having only one, standardized plan. The Examiner said that if the waiver weren’t passed, then 18,000 to 22,000 people would lose insurance.

Then again, I can’t not support it either. With the American healthcare system functioning as it is now, this plan seems to be the only way to avoid complete catastrophe, at the expense of having a little bit of catastrophe. The subsidy redistribution forces low-wage, older Americans out of the market — and these are the people that need healthcare most.

Then again, with Medica being the only insurer offering coverage, it’s reaching monopoly conditions. Even IID expressed this, when Insurance Commissioner Dog Ommen commented on the significantly higher prices on the Medica exchanges: “It does raise the question of are these being filed simply to access more in tax credit subsidies, or it is because someone in the market would freely pay $33,000 a year to buy commercial insurance?”

By standardizing a plan that all insurers can sell, the risk in the market is dispersed, giving less control to Medica and more control to consumers. By offering higher subsidies to younger Iowans, they can be enrolled in the system to balance out costs to older Iowans… that is if older Iowans who aren’t on Medicare can qualify for a subsidy for one of these standard plans. If they don’t then what did the plan accomplish?

Then again, Iowa offering a reinsurance program guarantees that Iowans who have costly medical bills won’t have the knowledge that they broke the system on their conscience, with the state saying it will cover the costs of such high care. Ultimately, this plan favors the middle-aged person with a stable enough income to qualify for significant subsidies, and who has a costly condition.

Like I said, I’m at a loss. There is no alternative though. Without this stopgap, thousands will not be able to have the peace of mind that seeing a doctor otherwise would have provided. There is also some concern, seeing as thst Iowa was supposed to have its proposal approved by the legislature and offered up to Iowans to make comments on. No such process was held. The slippery slope we walk on is that if Iowa is granted a waiver based on a different interpretation of the ACA rules, what else can get by?

For instance, according to Vox.com, Oklahoma’s 1332 wants to “change subsidy eligibility from 100-400 percent of the federal poverty level to 0-300 percent, while standardizing subsidies based on age and income; create two benefit options: a standard plan that covers 80 percent of medical costs, and a high-deductible plan that covers much less but can be used along with a health savings account; scale back the "essential health benefits" that plans are required to cover under Obamacare; allow insurers to charge older enrollees five times as much as younger enrollees, up from three times under Obamacare; and explore using either high-risk pools or reinsurance, or a hybrid thereof, to cover high-cost patients.”

If Iowa’s 1332 is approved, it could mean worse conditions for people in other states.

Then again, what choice do we have?

I think what we’re seeing from congress and states, is that in the current American healthcare system, there will always be people who fall through the cracks. There will always be people who are uninsured, and that’s just the way it will be. Just hope that you aren’t one of those people and you can make it through life.

Then again, it doesn’t have to be that way. The American healthcare system focuses on finding someone else to pay for medicine, not why medicine costs so much that we need other people to pay for it. In the insurance-dominated system of coverage, Americans will never get quality care at a reasonable price. If our system was changed to focus on why products cost so much, and regulating those costs, then maybe we could change that.