Focus on fixing insurance exchange

The problems with the insurance exchange in Iowa are fixable — and not a good excuse to fund tax cuts to the wealthy by forcing tens of thousands of Iowans off health insurance.

It’s time for Iowa’s congressmen and senators to start working on immediate measures to strengthen the health care system, and specifically the health insurance exchange, or marketplace. The obsession of some with bills to repeal and replace Obamacare has been a distraction from that task.

In recent days, bipartisan groups have sprung up in both the House and the Senate to begin developing legislation to stabilize the insurance market. These groups recognize the immediate need for measures to ensure that federal payments continue for cost-sharing reductions (CSRs) that help low-income people afford their copays and deductibles. Without the assurance that these payments will continue, premiums will rise sharply.

The president has threatened to continue his efforts to sabotage the Affordable Care Act (ACA) by ordering an end to CSRs. This threat has already prompted Medica, the only Iowa health insurance company still offering plans on the exchange, to plan for another premium increase.

The bipartisan efforts to shore up the insurance exchanges could include another important measure: a reinsurance program that would reduce the risk that a small number of high-cost customers will cause insurance company losses. The “million-dollar customer” has been cited as a factor contributing to the decisions of Wellmark and Aetna to exit the Iowa exchange. Reinsurance would establish a national pool to cover high-risk cases; this would allow companies to remain in the exchanges without drastic premium increases on everyone to pay for those few cases.

The Senate’s attempts to repeal and replace failed because they were wildly unpopular. These measures would have resulted in over 200,000 Iowans losing health insurance; would have effectively ended the expansion of Medicaid that covers thousands of low-wage workers; would have reduced Medicaid benefits for thousands of seniors, children, and people with disabilities; would have raised premiums and deductibles; would have gutted protections for persons with pre-existing conditions; and would have provided billions in tax cuts to wealthy individuals and corporations.

Another attack on coverage: Graham-Cassidy

Pragmatic efforts to stabilize the health insurance market stand in stark contrast to a last-ditch attempt to repeal and replace Obamacare that surfaced this week: the Graham-Cassidy plan. Like the previous failed bills, this plan would end the Medicaid expansion that now covers 150,000 Iowans.

Unlike previous repeal and replace bills, the Graham-Cassidy plan would also end the premium assistance that makes health insurance affordable to tens of thousands of low and moderate income Iowa families. While it replaces ACA funding of premium assistance and Medicaid expansion with a block grant, it provides no guarantee that the states will use that block grant to make health insurance affordable to those who need help the most. And the bill would further destabilize the insurance market by ending the mandate to purchase insurance, while making it more expensive, leaving insurance companies with the sickest and costliest customers.

The problems with the insurance exchange in Iowa are fixable. Let’s see if our Senators and Representatives actually try to fix those problems instead of using them as an excuse to fund tax cuts to the wealthy by forcing tens of thousands of Iowans off their health insurance.

Peter Fisher is research director of the Iowa Policy Project.

Does Iowa have the will to govern itself?

Can we govern ourselves? Apparently national candidates will come calling in Iowa without worrying about that. So maybe we should answer it for ourselves.

Does Iowa have the will to govern itself?

How ironic that we have reason to ask that question, a week after a presidential election that capped three-plus years of courting of Iowa voters, and a few days before a potential 2016 candidate visits to start all of it brewing again.

Yet the question is unavoidable. Consider two pieces in today’s Des Moines Register.

First, the Register reports, the federal Environmental Protection Agency may take over water quality enforcement in Iowa due to weak efforts by Iowa’s state Department of Natural Resources (DNR).

As IPP’s David Osterberg recently told EPA officials to hold DNR more accountable because the state is underfunding water protection.

“EPA should help the agency in bargaining with a legislature that has shown itself to be less concerned with water quality protection than tax cuts. … There is no question that if EPA simply accepts the agency’s agreement to try to do better, water quality will not improve in this state.”

If the EPA admonishment of Iowa’s lax environmental enforcement were not enough, we also are waiting for the state to offer its long-overdue decision on how to proceed on health reform. The 2012 election affirms the Affordable Care Act will not be repealed, so the state’s dragging its heels on creating a health insurance exchange no longer makes sense — if it ever did.

Yet, we now have a real question of whether it’s a good idea for the state to move ahead on its own with an exchange, where Iowans can shop for affordable insurance and not be denied coverage, or having the federal government do it for us. As the Register opined in an editorial today, “It is too important for this state to mess up.” Citing problems implementing temporary high-risk pools, and political dealings in previous legislative attempts to create an exchange, the Register noted:

“Iowans need the coming insurance marketplace to work for them in years to come. But state leaders have shown they are not the ones to design it.”

Can we govern ourselves? Apparently national candidates will come calling in Iowa without worrying about that. So maybe we should answer if for ourselves.

Posted by Mike Owen, Assistant Director

Health reform stakeholders should be careful what they wish for

Andrew Cannon photo
Andrew Cannon

Two thoughts as the 2012 legislative session nears: What is worth your time and attention? And, be careful what you wish for.

Both are vital reminders for all of us in our increasingly busy world. But as Iowa lawmakers again consider proposals for the competitive health insurance marketplace, or health insurance exchange, these reminders are relevant to health reform stakeholders.

Last legislative session, way back before the Fiscal Year 2012 budget gridlock, or the property tax debate, several lawmakers issued proposals for the creation of an exchange.

One proposal (which won the support of the health underwriters’  and insurance brokers’ lobby and no one else) seemed far more interested in protecting the insurance brokers than it was in creating an exchange that helps Iowans get affordable, quality coverage. Under that proposal, every purchase in the exchange would have been mediated by a broker, who, by law, would have received at 5 percent commission on each insurance sale in the exchange.

It’s worth remembering how the exchange is intended: Individuals, families, and small businesses will be able to quickly and easily compare health insurance plans — based on price, value, benefits and other relevant factors — and premiums will be based strictly on age, geographic area, and smoking status. Pre-existing conditions will be a thing of the past.

The exchange should permit small businesses to leverage some of the bargaining power of the larger employers. Many small businesses that offer employees coverage will be eligible for tax credits.

According to projections from the nonpartisan Congressional Budget Office, however, most exchange users will be individuals and families. Low- and moderate-income (up to 400 percent of the federal poverty level, or about $89,000 for a family of four) individuals and families who do not receive insurance through an employer will be eligible to receive sliding-scale premium assistance in the form of tax credits. Small businesses are likely to comprise a much smaller slice of the exchange-user pie.

This brings us back to the question this post opened with, what is worth your time and attention?

Do brokers really want to be involved in every purchase of health insurance in the exchange? Remember that most of these exchange customers won’t be HR folks, familiar with the ins and outs of insurance terminology. Most won’t be the proprietors of small businesses that have dealt with brokers in the past and know what sort of benefit and cost-sharing packages their employees have or haven’t liked.

Most exchange users are going to be members of ultra-small groups — families. Many will have moderate levels of income ($37,000 a year to about $89,000 a year for a family of four). For many, the terminology of health insurance terminology will be a new language. Deciding what benefit package they want or need will be a calculus as difficult as, well, calculus.

Is a bill like last session’s SF391 really the best use of a broker’s time and attention? I’m not a broker, so I’m in no position to say.

But it seems that rather than spending four hours describing insurance terms, benefits, and options to a family of four that has never purchased health insurance and earns $35,000 a year is a far less effective use of time than spending an hour on the phone with a seasoned HR rep from a business with 30, or even just 10 employees. And let’s not forget that many exchange users will end up not even purchasing insurance, but become enrolled in the newly expanded Medicaid.

Regardless of health reform implementation, there will be continued demand for the services of insurance brokers. They provide a valuable service, and are trusted by many small businesses and entrepreneurs. That won’t change.

But if brokers push for a repeat of last year’s offerings, they may just give themselves business that they don’t really want. Be careful what you wish (and lobby) for.

Posted by Andrew Cannon, Research Associate

Wellmark’s ‘uncertainty’ should not affect Iowa’s exchange

In a strong, consumer-oriented exchange, small businesses, individuals and families will want to participate. Why would Wellmark not want a share of that playing field?

Andrew Cannon photo
Andrew Cannon

Any business worth its salt can find a way to make a buck in a market with sufficient consumer demand.

Wellmark’s reported uncertainty in its ability to “break even” in the health reform-created insurance marketplace would seem puzzling for a company with 70 percent of the Iowa market.

According to an Aug. 31 Des Moines Register report (“Wellmark undecided on insurance exchange,” by Tony Leys), Iowa’s largest insurer is unsure it will participate in the health insurance marketplace created by the health reform law, citing concerns about its ability to “break even.”

This marketplace could be the place where as many as 156,000 Iowans* seek to purchase health insurance. Those with household income below 400 percent of the federal poverty line (about $89,000 for a family of four) will receive tax credits from the federal government to help cover the premium cost. And small businesses, which will also be eligible to purchase insurance in the exchange, will receive tax credits if they cover at least half of their employees’ premiums.

The stars are aligned to create consumer demand in the new insurance marketplace. Wellmark’s concern about breaking even probably should not be lawmakers’ first concern. The point of the exchange is to enhance the marketplace, not keep it restricted.

Rather, as we have repeatedly stressed, policy makers need to be focused on how to assure that lawmakers create an Iowa exchange that is fair and consumer-oriented.

Two groups heretofore are woefully underserved by the current health insurance market — individuals and families who don’t receive health insurance benefits at work, and Iowa’s small businesses. The exchange’s structure and governance should assure that Iowa individuals, families and small businesses can find affordable health insurance options.

In a strong, consumer-oriented exchange, small businesses, individuals and families will want to participate. Why would Wellmark not want a share of that playing field?

*Note: Data comes from the 2009 American Communities Survey (ACS), analyzed online using the University of Minnesota’s Integrated Public Use Microdata Series (IPUMS-USA). The ACS is conducted on an ongoing basis by the Census Bureau. Those 156,000 Iowans have household income in excess of 133 percent of the federal poverty level – the cut off point for Medicaid eligibility under health reform.

Posted by Andrew Cannon, Research Associate

Vision for Iowa’s exchange taking shape

Iowa is poised to take its first big step toward implementation of health reform.

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Andrew Cannon

Iowa has made many small steps toward health reform implementation; it is now poised to take its first big step.

The Senate State Government Committee is looking at Senate Study Bill 1063, which would establish Iowa’s health benefits exchange. Under the health reform law, an exchange is a regulated marketplace in which individuals and small businsses can compare and purchase health insurance plans.

The Affordable Care Act allows states considerable latitude in how to administer their exchanges — from how it is governed and financed to who or what administers it. States could even operate multiple exchanges within their state or create a regional exchange with a neighboring state. In December, an Iowa Fiscal Partnership brief detailed many of the choices for Iowa in creating its exchange.

Unlike the two existing exchanges — the Utah Health Exchange and the Massachusetts Health Connector, which are housed within an existing state agency and in a newly created agency, respectively — SSB 1063 would create a non-governmental non-profit organization to administer Iowa’s exchange. Seven voting board members would be appointed by the governor with Senate confirmation, with the Commissioner of Insurance and the Director of Human Services acting as non-voting board members.

Decisions such as exchange governance — and many, many more decisions — have to be weighed against the requirements of the Affordable Care Act, existing state law, the interests of the public and the goals of policymakers. Further, the experiences of other states with exchanges, though limited, and likely outcomes based on sensible economic projections should be taken into account.

In light of those criteria, features of SSB 1063 include:

  • Board composition — board members are to include “representatives of consumers and small employers”; strong conflict of interest prohibitions for brokers, insurers, and similar organizations.
  • Enrollment procedures — relevant agencies could share information to easily enroll Medicaid-eligible people.
  • Carriers that offer high-quality plans in the exchange would be required to offer identical plans outside the exchange at the same rates.
  • Data collection — the exchange would have the authority to collect data from insurers on quality and cost to help consumers make informed comparisons.
  • Consumers would have access to information about their deductible, co-insurance, network, etc., in easy-to-understand language.
  • Attempts to minimize adverse selection, the phenomenon of sick people using the exchange and healthy people remaining outside the exchange — by charging uniform fees to health plans in and out of the exchange; these fees would finance the exchange’s operations.
  • Independence of exchange — Funding streams would be independent of the legislative process.

However, SSB 1063 has some omissions that raise concerns:

  • Board composition — while those who might benefit financially from the insurance side would be prohibited from sitting on the board, the legislation would not prohibit doctors, hospitals, representatives of hospital associations, and other providers from sitting on the board.
  • Enrollment procedures — presumptive eligibility would further streamline these procedures.
  • Risk pooling — it appears that the individual and small businesses would be separate risk pools. Combining them would reduce risks for insurers and possibly keep prices down.
  • Attempts to minimize adverse selection — does not require insurers operating in the state to make any offerings in the exchange, nor does it address the potential for insurers to pay brokers higher commissions on plans sold outside the exchange.

While hardly a perfect bill, SSB 1063 is an effort to start Iowans down the road toward better access to quality and affordable health insurance.

Posted by Andrew Cannon, Research Associate

Reform should halt large rate increases

Health reform — the Affordable Care Act — attempts to make the market more affordable for individuals by allowing them to pool their risk together in a regulated marketplace called an exchange.

Andrew Cannon, research associate
Andrew Cannon

If Blue Shield of California gets its way, some of its individual market customers will see rate hikes as high as 59 percent.

You read that right: 59 percent. At the same time, we learned that health expenditures increased by their lowest rate in 2009.

So what gives?

We won’t know for sure until the state performs an actuarial review of the company’s request, but it seems that the problem in California is the same problem faced by customers of Anthem Blue Cross of California and Iowa’s Wellmark last year: The individual market doesn’t work.

Unlike employer-provided plans, which are purchased on the group market, the risk of medical cost in plans sold on the individual market is borne completely by the individual. Within a workplace, the risk that someone will fall ill is countered by the likelihood that other enrollees in the plan will stay healthy. Similarly, plans on the individual market are often subject to aggressive medical underwriting — or calculation of future medical costs based on medical history; plans in the group market are usually underwritten only on the age and sex of plan enrollees.

Health reform — the Affordable Care Act (ACA) — attempts to make this market more affordable for individuals by allowing individuals to pool their risk together in a regulated marketplace called an exchange. In addition to allowing individuals to pool their risk with other individuals, starting in 2014, the exchange will also tightly regulate how insurers deal with their customers.

Under the ACA, insurers will no longer be able to exclude pre-existing conditions, deny coverage, or base their premiums on anything other than age, sex, region the customer lives in, and smoking status. Further, individuals with income up to 400 percent of the federal poverty level ($88,200 for a family of four) will be eligible for assistance with their insurance premiums, on a sliding scale.

Though those affected by Blue Shield’s outrageous rate increase request won’t benefit from these reforms in the short term, the rate increase request illustrates the need for a robust exchange that provides attractive insurance options for individuals and small businesses and also provides a workable market for insurers to operate in.

Posted by Andrew Cannon, Research Associate