HHS Action Likely Means Lower Obamacare Premiums in Idaho (1)

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By Sara Hansard

The Obamacare health insurance market in Idaho is likely to have lower premiums as a result of the Trump administration’s March 8 decision to reject the state’s plan to sell coverage that doesn’t comply with the health law. But many people who make too much money to get premium subsidies will continue to be left without affordable options.

It isn’t yet known what action Idaho will take following Medicare Administrator Seema Verma’s letter to Idaho Gov. C.L. “Butch” Otter (R). The letter said that even though the Affordable Care Act “has damaged health insurance markets across the nation, including Idaho’s,” the Department of Health and Human Services must enforce the law and Idaho’s plan to allow noncompliant coverage would likely be in violation.

Verma’s letter provided a road map for how Idaho could offer cheaper, short-term health plans that don’t comply with all ACA requirements, such as providing coverage for people with pre-existing conditions without charging higher premiums than coverage for healthy people. But the action by the HHS, which the Centers for Medicare & Medicaid Services is a part of, will likely prevent other states from sharply expanding use of the plans.

CMS Not Rejecting Idaho’s Approach

Otter March 9 issued a response to Verma’s letter, saying it “was not a rejection of our approach to providing more affordable health insurance options for the people of Idaho. Her letter made it clear that Idaho’s plan aligns with the State’s responsibility for `substantially enforcing’ Obamacare. In fact, we consider the letter an invitation from CMS to continue discussing the specifics of what can and cannot be included in state-based plans. We will consider all possible options and then continue discussions with CMS and HHS on how best to achieve our shared goals of reducing the costs of coverage and stabilizing our health insurance market.”

Idaho could pass legislation or issue regulatory guidance on short-term plans, which the HHS has proposed enhancing by allowing them to be sold for up to a year, Katie Keith, an adjunct professor with the Georgetown University Law Center, told Bloomberg Law March 9.

“But that doesn’t get them where they want to be in terms of using this to stabilize their individual market,” Keith said. “With a few tweaks they could easily look like short-term plans. The state could adopt new regulations to require them to look that way. But their goal is to tie it to the marketplace” in which ACA-compliant plans are sold, she said.

Caution to Other States

Verma’s letter “should make it clear to other states and anyone else considering this that they’re going to run into headwinds,” Keith said. Iowa has proposed legislation that could expand the number of health plans offered by trade associations that also don’t comply with the ACA.

“I’m glad that HHS is sort of stepping in and taking a close look at it,” Keith said. “I’m glad that they’re initiating the enforcement process.” Idaho has 30 days to respond to Verma’s letter, after which the HHS makes a preliminary determination and the state gets another opportunity to make its case before a final determination is made, she said.

“The non-compliant plans would pull healthy risk out of the individual market, ultimately raising premiums for those in the ACA individual market,” Keith told Bloomberg Law in an email March 12. The American Academy of Actuaries sent a letter to Idaho Department of Insurance Director Dean Cameron saying that potential market fragmentation under Idaho’s state-based health benefit plans could increase ACA premiums and reduce protections for pre-existing conditions.

The Idaho Department of Insurance issued a bulletin in January outlining requirements for state-based health benefit plans, and Blue Cross of Idaho, the state’s largest health insurer with about 41,600 members of Idaho’s state-run ACA exchange, has applied to sell the plans.

Uninsured in Idaho Increasing

Miller & Chevalier, outside counsel for Blue Cross of Idaho, sent a letter to HHS Secretary Alex Azar Feb. 22 arguing that the state-based plans are legal. The individual health insurance market in the state isn’t healthy, the letter said.

“Since the advent of the Exchange in 2014, premium prices on the Exchange have increased more than 70 percent, nearly 30 percent last year alone, and all options on the Exchange are well more than $1,000 per month,” the letter said. The number of people covered in the individual market in the state has decreased since 2014, and the number of uninsured people in the state increased by 66,000 from 2015 to 2016, with about 250,000 people in the state currently with no health insurance, it said.

Carriers have lost “massive amounts of money in the individual market since 2014,” a total of $294 million, the letter said.

Segmenting Risk Pools OK

Joseph Antos, a health policy expert with the free market-oriented American Enterprise Institute, agreed with Keith that the chief significance of the CMS action is likely to be blocking the state from creating a single risk pool for its individual market. Under a single risk pool, insurers can’t segment enrollees into separate pools to increase premiums for higher-risk individuals compared to lower-risk people.

However, Antos argued, “The idea of segmenting risk pools is not an unreasonable idea as long as there is enough money in the system to cover the cost of people who have the highest health needs.”

Many people in Idaho run their own businesses or farms and don’t have employer coverage, Antos said. “Many of these people in Idaho are already driven out of the market,” because they can’t afford the high prices for ACA-compliant coverage, he said.

The federal government would pay more to cover subsidies for people in ACA exchange plans, Antos said. Idaho’s plan “increases federal contributions. It increases the deficit. But as far as Idaho is concerned that’s fine.”

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bloomberglaw.com

For More Information

CMS Administrator Seema Verma's letter to Idaho is at http://src.bna.com/wXD.The HHS proposed rule on short-term health plans is at https://www.federalregister.gov/d/2018-03208.The American Academy of Actuaries' letter is at http://actuary.org/files/publications/Idaho_030218.pdf.The Idaho bulletin is at https://doi.idaho.gov/DisplayPDF?Id=4712.Letter from outside counsel for Blue Cross of Idaho is at http://src.bna.com/wXU.

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