Iowa drops stopgap health insurance proposal, with sign-ups set to begin Nov. 1

Iowa leaders pulled the plug Monday on their “stopgap” proposal to try to shore up the state’s rickety market for individual health insurance policies.

With open enrollment set to start in less than two weeks, the state could no longer wait to hear if federal officials would approve the plan, which would have rewritten significant Affordable Care Act rules on how federal subsidy money is used. 

"I'm extremely disappointed," Gov. Kim Reynolds told reporters at a press conference Monday afternoon.

Reynolds, a Republican, said Trump administration officials gave the proposal fair consideration. But she said they couldn't make it square with strict rules for such waivers under the Affordable Care Act, also known as Obamacare. "It came down to the law," she said. "... It just does not afford the flexibility that we need to be creative."

The stopgap proposal, first outlined by state regulators in June, would have affected about 72,000 Iowans who buy their own health insurance instead of obtaining it via an employer or a government program, such as Medicare or Medicaid. The proposal would have reconfigured federal subsidies under the Affordable Care Act, offering help to Iowans who make too much money to qualify for current subsidies. The plan also would have helped insurance carriers shoulder the cost of members who use more than $100,000 worth of health care in a year.

Democratic leaders disputed Republicans' attempts to blame the Affordable Care Act, which was passed under Democratic President Barack Obama.

"I think they can claim this debacle as their own making," Sen. Janet Petersen said in an interview Monday afternoon. She said the recent turbulence in Iowa's market came after Republicans in Congress and the White House threatened to repeal the Affordable Care Act last spring without offering a solid replacement. 

Petersen, D-Des Moines, is the Iowa Senate's new minority leader. She recommended last summer that Republican legislators and the governor agree to let children sign up for the state's Hawk-I health insurance program if their families lose private coverage. That suggestion was met with "crickets" from Reynolds' office, Petersen said Monday. Instead, the governor focused all efforts on the stopgap plan. "I think they should not have put all their eggs in one basket," Petersen said. 

Insurance Commissioner Doug Ommen, who came up with the stopgap plan, said it would have stabilized the market by encouraging more young and healthy people to buy insurance. Without the stopgap plan, just one carrier, Medica, intends to sell individual insurance policies in Iowa next year. It intends to raise premiums by an average of more than 57 percent. Some consumers will see premiums more than double because their current carriers had lower premiums than Medica's this year.

However, about 50,000 Iowa consumers will be sheltered from the premium increases because they qualify for Affordable Care Act subsidies that will rise to cover the higher costs. But Iowans who make too much money to qualify for Obamacare subsidies would have to pay the whole amount.

Ommen predicted roughly 20,000 of them would drop their coverage. "The healthiest are the first to go," he said at Monday's press conference. "Those are the people who contribute to a health insurance system, who actually have reasonably low claims." Their departure would lead to a "death spiral" of sharply increasing premiums pushing everyone out of the pool except people with expensive health problems, he said.

Iowa is suffering some of the most dramatic increases, but other states are seeing the same trend, Ommen said. "This is a national problem, and Congress needs to fix it," he said. 

Reynolds had asked Ommen to come up with an alternative plan in May, when it appeared that no insurance carriers would offer individual insurance policies in Iowa for 2018. Two large carriers, Aetna and Wellmark Blue Cross & Blue Shield, had announced they were pulling out of the market because of heavy losses and a relatively unhealthy pool of consumers buying the policies. But Medica, a third, relatively small carrier, agreed to stay in the market if Ommen approved steep premium increases.

Sign-ups for 2018 coverage are to begin Nov. 1, and Iowans who need individual insurance will have only six weeks to decide on their options. Most Iowans who have individual coverage for this year have policies from Aetna. Ommen said those customers would be "auto-enrolled" into Medica plans if they take no action. 

Medica released a statement Monday, saying it is prepared to sign up Iowa consumers who need individual insurance policies. The company said consumers will soon be receiving information from it and from the federal government about their options, now that Iowa's stopgap plan is off the table. "While this is not the preferred outcome for the state of Iowa, we want consumers to know that Medica is ready," company leaders wrote. "We have been in preparation to serve as the only individual insurance carrier in Iowa since our filing in June."

Ommen had hoped his stopgap proposal would gain quick federal approval from the administration of President Donald Trump, who is a fellow Republican. The proposal was vigorously supported by Iowa’s governor and two U.S. senators, who also are Republicans. But the Washington Post recently reported that Trump personally told a top administrator to reject the Iowa proposal.

Administrators continued to talk to Iowa officials about the plan, but they didn’t commit to it. Last Thursday, they sent Ommen a letter indicating they still were considering the idea and suggesting the state would need to come up with substantially more money to make the idea work.

Reynolds said officials from the U.S. Treasury Department told Iowa last week it would be several more weeks before they could provide an estimate on the finances. She said she could wait no longer to make a decision, and so Ommen withdrew the stopgap-plan application.

Reynolds continued Monday to urge Congress to repeal and replace the Affordable Care Act with a plan that gives states flexibility to address problems in their markets. "Congress must replace Obamacare with health care reform that is affordable for everyday Iowans and empowers consumers to have high-quality health care," she said. 

The Trump administration has approved waiver plans from other states, but they were not as ambitious as Iowa's, Ommen said. Those plans left more Obamacare rules in place, and would not have done much to help the Iowa situation, he said. 

The U.S. Senate is considering a bipartisan bill that would give states more flexibility to alter Obamacare rules. But many experts doubt the so-called Alexander-Murray proposal could be implemented in time to affect premium rates or offerings for 2018, given that sign-ups start Nov. 1 and are slated to last only through mid-December.

Denison insurance broker Todd Thams said he doubted many Iowans could afford the new Medica premiums on individual insurance policies unless they qualify for Affordable Care Act subsidies to help pay them. Thams, who is president of the Iowa Association of Health Underwriters, said Monday that the rest should check with insurance agents about other possible options.

For self-employed people, Thams said, agents might be able to find a "small-group" policy, even if the consumer has no other employees. He added that people who work for small employers that don't provide health insurance might suggest the companies offer coverage without contributing to the premium. Such policies would not be eligible for Obamacare subsidies, but they might be cheaper than the extremely expensive individual policies Iowans will see for 2018, and their premiums would be tax-deductible, he said.