Iowa’s governor signed into law a plan that will intentionally break the ACA market in Iowa
When you step back, Iowa's plan to let the Farm Bureau sell unregulated insurance is pretty wild.
Although it looks like health insurance, the Farm Bureau's plan will not be called health insurance. Therefore, it won't be regulated by the state or have to follow any ACA rules. pic.twitter.com/Ik4Gj0GP6I
— Larry Levitt (@larry_levitt) March 28, 2018
Wellmark, Iowa’s Blue affiliate, and the Farm Bureau will be allowed to sell to any Farm Bureau member “health benefit plans” that are explicitly not health insurance and therefore unregulated by the ACA. These plans can underwrite. These plans can exclude pre-exisiting conditions. These plans don’t need to offer a full set of benefits. These plans are basically a reversion to the 2009 status quo.
And if an individual can pass underwriting and does not qualify for significant ACA subsidies, these plans are a good deal as that group of people are mainly looking for hit by a meteor protection. Well subsidized individuals will be indifferent to these plans as the subsidies buys affordable comprehensive insurance on the Exchange. The people in trouble from this scheme will be individuals who either can never pass underwriting or will pass with so many upcharges or restrictions that passing is still pointless. Their options are to either move out of the state or to drop their incomes so that they qualify for ACA subsidies.
Additionally, Wellmark will be effectively granted a de facto monopoly on non-group insurance sales in Iowa. There is currently a single insurer, Medica, offering ACA plans. Wellmark has signalled that it wants to re-enter the ACA market in the state for 2019. Wellmark will be able to strategically offer ACA compliant products that can stick Medica with very high cost individuals without sufficiently high risk adjustment payments to make them whole. At the same time, Wellmark can pick up all of the limited remaining good risk into the underwritten not quite insurance plans while choosing how much and at what price point they want to take on of the remaining highly morbid guaranteed issued pool. Medica has no ability to defend itself or project its exposure. I will be shocked if Medica is still selling policies in Iowa next January.
Wellmark then will have the entire individual market and significant elements of the group market in Iowa. They will have an incredible data and pricing advantage against any potential competitor. And given that the Iowa political establishment pulled the rug out from underneath Medica after Medica did them a solid, I don’t think many competitors will be willing to enter the state.