MEDICAL GERRYMANDERING: Iowa figures out how to get rid of their middle-class undesirables!

A couple of weeks ago, I noted that Iowa had come up with an ingenious plan to resolve their troubled individual health insurance market: Start offering junk plans for everyone and damn the consequences:

Well, sure enough, just yesterday the Iowa state Senate voted to allow unregulated junk plans to be sold to...pretty much anyone in the state:

The Iowa Senate voted Wednesday to let the Iowa Farm Bureau Federation and Wellmark Blue Cross & Blue Shield sell health insurance plans that don't comply with the federal Affordable Care Act.

The new coverage could offer relatively low premiums for young and healthy consumers, but people with pre-existing health problems could once again be charged more or denied coverage.

The bill passed 40-9 and now goes to the House. It would affect people who need to buy individual health insurance policies instead of coverage via an employer or government program, such as Medicare or Medicaid. The cost of such policies have been skyrocketing, especially for people who make too much money to qualify for Affordable Care Act subsidies.

Yes, I absolutely agree this is the most pressing flaw of the ACA: The 400% Federal Poverty Level income cut-off for premium tax credit subsidies. A problem which could be easily fixed by simply removing the 400% cap, as has been proposed twice now in both the Senate and the House.

Feenstra said anyone excluded from the new plans because of a pre-existing health problem could go and buy policies from a carrier offering insurance that complies with the Affordable Care Act. But for others, he said, the new plans would offer a less expensive option.

The cluelessness of Rep. Feenstra about how health insurance and risk pools work is incredibly depressing. For one thing, the ACA's Open Enrollment Period is still in effect (with good reason), which means that anyone shut out of the junk plans had better hope they discover this between Nov. 1st and Dec. 15th, because if it happens outside of that window they're screwed. Worse, of course, is that if they earn more than 400% FPL, they'll have no chance of affording an ACA compliant plan because of the skyrocketing premiums caused in large part by healthy people moving onto these junk plans.

But critics fear the change would further destabilize Iowa's already fragile health insurance market and undermine Affordable Care Act rules designed to protect consumers.

So how on earth can these types of "insurance policies" be considered legal under the ACA? Simple: They aren't insurance policies.

But several Democrats noted the new coverage would technically not be defined as health insurance, and would not be regulated by Iowa's insurance commissioner.

Well, that was the Iowa state senate. It's a few weeks later, and the other shoe just dropped:

Iowa bill allowing plans to skirt Obama's Affordable Care mandates sent to Gov. Reynolds

The Iowa Senate gave final approval Tuesday to controversial legislation that would exempt certain health plans from Affordable Care Act mandates.

The legislation combines two proposals backers say would reduce health insurance costs, but critics worry could undermine consumer protections.

Senate File 2349 was approved 37-11, sending it to Gov. Kim Reynolds, whose spokeswoman said she was "eager" to sign it. The measure passed the House last week.

...The bill was merged last week with another proposal that would allow the Iowa Farm Bureau Federation to work with Wellmark Blue Cross & Blue Shield to sell health insurance plans that don't comply with the federal Affordable Care Act to its own members. The bill says the plans are not considered health insurance and therefore can't be regulated like health insurance.

The new coverage could offer relatively low premiums for young and healthy consumers, but people with pre-existing health problems could once again be charged more or denied coverage.

...Sen. Mark Chelgren, R-Ottumwa, defended the legislation, saying it is an example of how health care was provided before Congress enacted the Affordable Care Act.

Why yes, yes it is; that's exactly the problem, Sen. Chelgren.

In short, starting in July:

  • If you have a pre-existing condition and earn less than 400% FPL, you can enroll in a heavily-subsidized ACA exchange policy.
  • If you're healthy, awesome, you can enroll in a dirt-cheap junk plan! That is, until you're diagnosed with something expensive and not covered. Then, if you earn more than 400% of the Federal Poverty Line, you shift to...
  • ...if you have a pre-existing condition but earn more than 400% FPL? Well, you've just gone from being a little screwed in 2017 to kind of screwed in 2018 to completely and utterly screwed starting in 2019.

...The part of the bill involving Wellmark and Farm Bureau is unusual, in that it offers companies an exemption from regulations that similar companies would still have to follow.

Critics of the bill include Medica, a competitor of Wellmark’s that is currently the only carrier selling individual health-insurance policies in Iowa. Medica contends the bill would unfairly let Wellmark “cherry pick” healthy customers, leaving Medica with a more expensive pool of customers to insure. The Minnesota-based carrier has said it might challenge the proposal in court.

I should also note that the timing of this bill becoming law is important as well. Apparently Wellmark would be allowed to start offering these junk policies starting July 1st 2018, which means that in addition to many of those currently uninsured, there could potentially be an exodus of several thousand heatlhy enrollees from Medica's ACA-compliant plans starting then.

Under the ACA, Medica is not allowed to alter their premiums mid-year...which means they'd have to eat the worsened risk pool for the second half of the year. Furthermore, it's the 4th quarter which is usually the worst for insurance carriers, as enrollees who've maxed out their deductibles try to squeeze in some last-minute procedures before the deductible clock resets on January 1st. I wouldn't be at all surprised to see Medica take a bath in Q3 and especially Q4 of this year.

Medica is 100% on target here. As I predicted when Wellmark made the surprise announcement back in February that they were jumping back into the individual market just a year after dropping out of it:

Well, now...that's pretty ominous. Sounds to me like Wellmark may be in cahoots with the Governor & Insurance Commissioner to try and push something along the lines of what Idaho Governor Butch Otter (yes, that's the name he goes by) is trying to pull. That might explain their sudden about-face on jumping back into the exchange in the meantime. Then again, it might not be anything as nefarious as that. Stay tuned...

NARRATOR: It was indeed something as nefarious as that. Even the healthy folks who think they're getting a bargain are in for a rude awakening, because...

Former Iowa Insurance Commissioner Susan Voss said she’s concerned about the precedent of exempting an insurer from virtually all regulation. “It just doesn’t seem right,” she said in an interview.

The bill would declare that the new coverage would not technically be insurance, so it wouldn’t have to follow state or federal rules. Voss, a Democrat, scoffed at that. “If it walks like a duck and quacks like a duck, it’s a duck,” she said. “This is insurance.”

Voss agreed with the proposal’s backers that Wellmark and the Farm Bureau are strong Iowa organizations with long track records. But she said consumers should still be aware that if something goes wrong with the new type of coverage, they could not seek help from state regulators. For example, she said, the insurance division can now respond to complaints that an insurer is refusing to pay medical bills or has unfairly dropped a customer who developed a costly illness. Under the proposed arrangement, the division would have no oversight of the new health plans.

...which means that if Wellmark screws them with fine print, hidden charges or simply decides to drop them from their plan because Reasons, they're SOL with nowhere to turn.

Plus, of course, if they do get diagnosed with some ailment that isn't covered by the cheap policy, they risk getting kicked to the curb...where they'll join the rest of the middle-class-but-sick.

Case in point: Remember the $12 Million Teenager from a couple of years ago?

Wellmark Executive Vice President Laura Jackson said poor health and rising medical costs forced the company to seek state permission to raise premiums so aggressively on the plans in question. She said the company spent $1.27 on health care last year for every dollar in premiums it took in for those customers. The company says it lost $99 million on those customers in the past two years.

She said about 10 percentage points of the increase stem from the costs of a single, extremely complicated patient who is receiving $1 million per month worth of care for a severe genetic disorder.

Yes, that's right--a single policy enrollee was apparently eating up $1 million in policy claims per month. There was some follow-up about this a year later, when some further details were revealed about this person:

Somewhere in Iowa, a teenager with a severe bleeding disorder holds the answer to a nationally debated riddle: How could anyone rack up more than $1 million per month in medical bills?

Iowa’s largest health insurer, Wellmark Blue Cross & Blue Shield, has cited the case as an extreme example of exploding health care costs. Wellmark has said the single member’s bills amplified fast-rising premiums among tens of thousands of other Iowans who buy their own insurance.

The case reportedly contributed to the insurer’s decision to stop selling such policies here next year, which led the state’s other two main carriers to say they probably also will pull out of Iowa's individual insurance market.

The million-dollar anecdote sparked widespread speculation about what type of illness could lead to such colossal medical bills. In public hearings and interviews with reporters, Wellmark leaders have said the customer had an unspecified genetic disorder.

But a company executive shared more details during a recent presentation to the Des Moines Rotary Club. The patient is a teenage boy who has hemophilia, a genetic disorder that prevents the blood from clotting, Wellmark Executive Vice President Laura Jackson told more than 100 people who attended the Rotary meeting. She did not name him or give his hometown.

Setting aside the ethics of revealing this information to a gathering of 100 people (depending on how many details she gave out, it's possible that the teenage boy might be identifiable, violating HIPPA privacy rules), as my colleague Dave Anderson noted at the time:

"Everyone is trying to avoid the $12 million-man," Duke University research associate David Anderson told the publication PolitiFact. "Because whoever catches him basically can’t make money."

Now, I have no idea how much this patients' family earns per year. If they fall below the 400% FPL threshold, he'll be fine assuming Wellmark sticks to their promise of re-entering the ACA exchange and covers the teenagers' network of doctors/hospitals/treatments.

HOWEVER...if the family earns more than 400% FPL--around $80,000 for a family of three--the odds are that he and his family may have to move out of the state...because the new junk plans won't cover him, while the massive premium rate spike caused by so many healthy people dropping out of the ACA plans will make them unaffordable without subsidies.

Assuming Medica's legal challenge to the junk plans fails, I wouldn't be at all surprised to see multiple stories starting this fall or early next year about middle-class Iowa families being forced to pack up and leave the state entirely because one of their family members has some extremely expensive-to-treat medical problems. They'll have to move to a state which didn't deliberately make it impossible for them to afford healthcare coverage by completely undermining the whole point of the ACA in the first place.

Call it medical gerrymandering, I guess.