Iowa's insurance division submitted an Obamacare waiver to the Trump administration Tuesday to try to stabilize its exchange and avoid causing more than 20,000 Iowans to become uninsured, but the path to approval is uncertain.
Still, its backers hope approval will come quickly and take less than the 180 days the federal government typically requires. The waiver specifically asks the Trump administration for "emergency relief from strict compliance." The state is running out of time because it must sign insurance contracts by Sept. 27.
Iowa's waiver would restructure Obamacare's tax credits available to people in the exchange, making a single, standard plan available to every eligible customer, instead of tiered levels, and would have a flat credit to help anyone who enrolls pay for his or her premiums, based on age and income.
"We went with a flat subsidy, which actually gives every consumer purchasing power," Iowa Insurance Commissioner Doug Ommen said in an interview. "By redirecting those subsidies we can actually do a better job of bringing rates down from what they otherwise would be to attract other people in."
Under the plan, Iowa also would create a reinsurance program, which would take funding from federal tax credits for premiums and cost-sharing reduction subsidies that go to out-of-pocket costs, and put it toward the claims of more costly enrollees. The cost-sharing subsidies, which are mired in a political and legal battle in Washington, would not be provided to customers.
Even with the measure, Iowa's insurance division wrote that it still expected 4,000 to 6,000 people in the state to become uninsured. Still, its authors point out, it would be lower than the 18,000 to 22,000 people otherwise expected if the waiver is not approved.
"This does not fix all of the problems we've seen in [Obamacare] but it dramatically impacts the rates that people without subsidies would otherwise face and likely leave the market," said Ommen, a Republican.
Outside groups have raised concerns about how the plan would offer lower subsidies to some people who are lower income than are currently provided under Obamacare, but state officials hope that including more young, healthy people in the risk pool would help balance out costs.
Minnesota-based Medica is the only insurer that has committed to selling plans on the exchange in Iowa, but Wellmark Blue Cross and Blue Shield said it would return if the short-term solution is approved and would sell plans in all 99 of Iowa's counties. The Iowa insurance division said in its proposal that it hopes other insurers might enter the exchange as well.
Officials are hopeful that the measure might lower premiums for 2018. As the market in the state stands now, customers in the exchange could face gross premium increases of 100 percent, Iowa's insurance division said in its waiver submission. Though Medica has filed for rates that are 43 to 56 percent higher than it filed last year, the increases are more significant for those who had cheaper plans under Aetna.
Under Obamacare, people making more than $48,240 for an individual and $98,400 for a family of four do not qualify for subsidies, so they feel the brunt of premium increases and sometimes forego coverage as a result. For instance, under current subsidy provisions a 55-year-old couple making $65,000 a year could pay as much as $33,000 for coverage, Ommen said.
For those with lower incomes, any premium increases are cushioned by an increase in federal subsidies, meaning they don't personally feel the impact of higher coverage costs. At the same time, these customers often have more costly medical bills than those with higher incomes. Ommen questioned whether setting up such a pool, where an insurer who had a monopoly on the market and could set high rates, was beneficial.
"In most geographic areas in our state [Medica] were the highest cost to begin with," Ommen said. "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? I think that's one of those issues that has to be addressed by Congress. You can't have a market entirely dependent on tax credit subsidy."
The "innovation" or "1332" waiver is an option states have under Obamacare that the Trump administration has encouraged. The waiver allows states to craft healthcare plans and shift some of the funding they would have received from the federal government, as long as they meet certain criteria.
For example, ahead of a submission to the federal government the waivers must be enacted through a state legislature and residents must be allowed to provide public comment. Though Iowa held such forums in July, the waiver was crafted by the insurance division, not by lawmakers.
Ommen said he does not anticipate any legal issues, however, because the state legislature had given him broad authority to implement Obamacare.
Under the waiver's rules, states must provide data, such as actuarial and economic analyses, to demonstrate that their proposals would work to meet certain criteria, such as reducing costs for customers and covering at least the same number of people as under Obamacare. The waivers cannot increase the federal deficit. Iowa's plan spans 192 pages.
Iowa has faced troubles because it allowed plans regulated by pre-Obamacare rules to continue to be sold. That created an unbalanced risk pool in which healthier enrollees kept the old plans and sicker enrollees joined the exchanges, where the majority of them received tax-subsidized coverage. The system became costly for insurers that sold plans in the exchange. One customer accrued more than $12 million in medical bills because of complications related to hemophilia, a life-threatening blood disorder.
The situation in the state, compounded with uncertainty over how Congress or the Trump administration will change Obamacare, has left the Iowa Insurance Division looking for ways to stabilize its exchange in the short term.
Ommen said the state insurance division had weekly calls with members of the administration, including the Department of the Treasury, to ensure that its waiver would meet requirements to be accepted.
"They have been very collaborative," he said. "We have been having regular conversations and providing insight and working with them."
The insurance division's waiver raises the fact that the Obama administration had allowed grandfathered plans to continue, a move its members view as evidence that the administration "does have authority to be accommodating and adaptable in its interpretation and implementation" of Obamacare.
"The Iowa stopgap measure is not intended to be a permanent solution," they wrote in their proposal. "Given the collapse of the Affordable Care Act (or Obamacare's) individual health insurance market resulting from years of skyrocketing premiums and market segmentation, it will take federal legislation to fully repair and restore Iowa's individual health insurance market."