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Iowa's Individual Health Rescue Proposal, Dissected

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Iowa has come up with a proposal for stabilizing its individual major medical insurance market in 2018.

The state is asking the federal government for permission to replace the state’s current Affordable Care Act public exchange program with a new, state-run program.

Officials at the Iowa Insurance Division say in a proposal summary that they need to replace the current system because insurers are abandoning it.

(Related: Senate Mulls Health-Law Rewrite Pushing ACA Change to 2020)

About 72,000 Iowa residents now use individual major medical policies written under the Affordable Care Act rules that took effect in January 2014.

Some states, including New York, Oregon and Washington, have received 2018 individual major medical product filings from multiple carriers, but Iowa looks as if it’s on track to have no individual major medical issuers in most counties, Iowa officials say.

Iowa claim costs have been high, the federal government has failed to make the Affordable Care Act risk corridors program insurer support payments it promised, and, today, uncertainty in Washington has made a bad situation worse, officials say.

“This uncertainty also prevented Iowa state legislators from enacting legislation during its sessions that might have supplemented any solutions from the federal level on this issue,” officials say.

If Iowa wins approval for its proposal, it’s possible that other states could end up converging on the Iowa model for 2018.

Here’s a look at some highlights from the proposal.

1. Iowa is trying to color within the Affordable Care Act lines.

The Affordable Care Act itself includes a provision, Section 1332, that lets states propose alternatives to the standard Affordable Care Act commercial health insurance and Medicaid rules.

President Donald Trump has issued an executive order encouraging federal agencies to do what they can to minimize any burdens imposed by the health law while his administration works to replace it. (Image: Centers for Medicare and Medicaid Services)

(Image: Centers for Medicare and Medicaid Services)

Iowa is asking the Centers for Medicare and Medicaid Services, the agency that runs the public exchange program and many other federal health programs, to consider its proposal either as a Section 1332 Affordable Care Act rule waiver request or as a request for Affordable Care Act burden relief.

(Related: Price Reboots ACA Reboot Program)

The state has also tried to come up with a program design that would offer coverage that would comply with the current Affordable Care Act coverage standards.

Iowa officials note that the administration of former President Barack Obama eased Affordable Care Act requirements at times. One major example is the administration’s move to create “grandmothering,” officials say.

Originally, the Affordable Care Act was supposed to let people keep health coverage written before March 23, 2010, when the main part of the statutory package became law, even if the old, “grandfathered” coverage failed to meet the new Affordable Care Act standards.

The grandmothering system let insurers, states and policyholders keep health coverage written between March 23, 2010, and Jan. 1, 2014, in effect after Jan. 1, 2014, even though the policies did not qualify for grandfather status and did not comply with Affordable Care Act rules.

2. The Iowa program plan menu would be much shorter than the current Affordable Care Act exchange program menu.

Originally, Affordable Care Act drafters expected most states to set up their own locally run exchange programs.

The U.S. Department of Health and Human Services, the parent of the Centers for Medicare & Medicaid Services, set up, a public exchange enrollment and account administration system, to handle the exchange job for states that were unwilling or unable to do the job themselves.

Some states were enthusiastic implementers of Affordable Care Act programs. Some resisted the programs as much as they could, Iowa took a middle path: It helped with some implementation efforts, but it has used the exchange enrollment system.

Today, Iowa residents can buy many different types of health plans, from several issuers, through

The Affordable Care Act requires issuers of individual major medical coverage to cover a standardized “essential health benefits” package of benefits, and to set the richness level of a plan at one of five different coverage levels, ranging from catastrophic coverage up to platinum-level coverage.

Calendar (Image: Thinkstock)

(Image: Thinkstock)

A mid-level silver plan is supposed to cover about 70% of the actuarial value of the essential health benefits package.

The Iowa proposal would eliminate most of the different health plan flavors.

The state would invite any carrier that wanted to sell individual coverage to participate in the program. Each issuer could sell just one silver-level plan.

A participating plan would provide coverage without any annual or lifetime caps on benefits.

3. Iowa would pay for the program with a combination of state and federal money.

If the Iowa individual exchange program worked properly in 2018, state residents would probably get about $352 million in Affordable Care Act premium tax credit subsidy support and cost-sharing reduction subsidy support, officials say.

For a 55-year-old, for example, the monthly tax credit might range from $117, for an enrollee earning 400% of the federal poverty level, up to $828, for an individual earning just 133% to 150% of the federal poverty level.

The state wants to use that money to create its own state-run premium tax credit subsidy program, and to use federal and state money to create a reinsurance program for patients with claims over $100,000 per year.

4. Iowa would use strict application period limits to hold down coverage costs. 

Iowa would let people sign up for its state-run program without medical underwriting, but it would make signing up for the uninsured easy only during a limited open enrollment period.

Most people who wanted to buy coverage through a special enrollment period, outside the open enrollment period, would have to show they had stayed covered throughout the previous 12 months. People who were uninsured during the previous 12 months could not get covered through the new program.

The only exceptions Iowa lists in the proposal would be for new babies and adopted children.

— Read Obama Administration OKs Hawaii ACA Waiver Program on ThinkAdvisor.