Iowa wants help from the federal government to bail out the state's individual health insurance market, which has emerged as a leading example of troubles with the federal Affordable Care Act (ACA).
In recent months, two leading carriers have announced plans to exit Iowa's individual market for 2018, which means Minnetonka-based Medica could be the only insurer offering coverage to individuals statewide next year.
Medica officials, however, have said they can't continue the Iowa business without changes that would help stabilize the market. Several health plans have dropped the Iowa market after losing millions of dollars.
"In Iowa, we are in a collapsing market because of the fact that the healthy and young individuals are not participating," said Doug Ommen, the Iowa insurance commissioner, during a news conference. He said the proposal announced Monday is "a stopgap measure in order to address the crisis that we have here in Iowa, and our collapsing individual market."
The troubles are confined to the individual market, which serves self-employed people and those who don't get health insurance from their employer or a government program. About 72,000 people buy coverage in Iowa's individual market.
The proposal announced Monday would change the structure of federal tax credits provided by the ACA so that younger enrollees would get more help, and subsidies would become available to those with higher incomes. The Iowa proposal also would eliminate "cost-sharing reduction" funds for low-income residents by redirecting the money to mitigate likely premium increases.
Iowa regulators are calling for a "reinsurance" program to help insurers cover the cost of patients with high-cost medical conditions. The ACA offered such a program through 2017, and Minnesota lawmakers have called for creating a reinsurance program to ensure health plans will compete next year in Minnesota's market.
The proposed changes in Iowa include provisions to stabilize the market that Medica has called for, including a reinsurance program, said Geoff Bartsh, a Medica vice president, in a statement. But the plan also includes "significant changes to the subsidy structure that will have an impact on which consumers do and don't buy coverage," Bartsh said.
"We are still analyzing those changes to help our decisionmaking should this proposal be approved," he said.
The ACA brought sweeping change to the individual market by eliminating pre-existing condition exclusions that helped insurers control costs, but were widely unpopular. The health law provides subsidies to people who buy individual coverage through government-run "exchanges," but the ACA didn't create an alternative means for providing subsidized coverage if private insurers don't compete.
Iowa is just one of the state insurance markets afflicted by pullbacks by health plans. Unless new carriers surface, an estimated 45 counties across Missouri, Ohio and Washington state will have no options next year.
Ommen said the state's proposal is supported by Wellmark, which is Iowa's dominant health insurer and sells coverage under the Blue Cross and Blue Shield brand. The insurance company would continue offering individual market coverage for 2018 if federal regulators approve the proposal, Ommen said.
Earlier this year, Wellmark said it would drop out of the market in 2018 due in part to financials losses, and the news was followed by a similar announcement from Connecticut-based Aetna.
Previously, Minnetonka-based UnitedHealthcare dropped out of the Iowa market as part of a broad retreat from the ACA exchanges. The state also lost one of the new "co-op" insurers launched under the health law to boost competition.
Ommen, along with top officials from Wellmark and Medica, discussed the stopgap proposal earlier this month with officials from the federal Centers for Medicare and Medicaid Services (CMS), according to the Iowa Insurance Division. The proposal must be approved by CMS.
During the news conference on Monday, Ommen said Iowa regulators hope to recruit other health plans to the market due in part to the proposal, which is formally known as "innovation waiver" under section 1332 of the ACA. Regulators in Minnesota and a few other states also have submitted "1332 waiver" applications.
Earlier this year, Minnesota lawmakers proposed spending more than $500 million on reinsurance over a two-year period. The plan is contingent on CMS granting the state's 1332 waiver.
The Iowa proposal includes about $80 million for reinsurance, with all money coming from the federal government.