Kansas bypasses Obamacare; will other states follow?

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Kansas' new law allowing the sale of health plans that can turn away people with pre-existing medical conditions has heightened concerns that more states may move to allow leaner, cheaper plans that don't comply with Affordable Care Act rules.

So far, three states have passed laws allowing their Farm Bureaus to bypass ACA rules and sell health plans that are free from any state insurance regulation. Kansas became the latest last week. The state's Democratic governor let the bill become law without her signature in the hope of winning GOP support for a bill to expand Medicaid to low-income adults, though that remains uncertain.

The move toward the skimpy plans comes despite strong public support for prohibiting insurers from discriminating against people with pre-existing conditions, and recent congressional Republican bills that would bar health insurers from doing so.

The Iowa Farm Bureau started selling unregulated plans last November, in partnership with Wellmark Blue Cross and Blue Shield, under a bill passed by state Republicans last spring. The Tennessee Farm Bureau Federation has been able to sell such plans since the 1990s. Neither Farm Bureau organization has reported how many people currently are enrolled in these plans.

Neither the Obama administration nor the Trump administration has taken any steps to require these plans to follow the federal insurance rules. Experts doubt any legal challenge would succeed because laws in those three states explicitly declare that Farm Bureau plans are not licensed or regulated as health insurance. Therefore, they likely are not subject to ACA requirements such as guaranteed issue and minimum essential benefits.

CMS Administrator Seema Verma gave a speech on Tuesday encouraging states to seek waivers easing the rules for the types of plans insurers can offer. 

Cheaper, skinnier plans that can use medical underwriting could destabilize the ACA market by siphoning healthier people away from ACA-compliant plans and driving up premiums, experts say.

"It may not be immediate, but it won't take long," said Sandy Praeger, a Republican and former Kansas insurance commissioner who opposed the bill. "The only way the Farm Bureau can sell cheaper policies is by limiting benefits and only insuring people who are low risk. This could spread to other states."

The stated purpose of the new Kansas law is to make cheaper coverage available to farm families whose incomes are too high to qualify for ACA premium subsidies, though any Kansas resident can pay the $45 to $65 membership fee and apply for coverage. The Farm Bureau claims its plans will be up to 30% to 50% cheaper than ACA exchange plans. It's estimated that 11,000 to 42,000 Kansans will be covered by the plans, said Ryan Flickner, the Kansas Farm Bureau's senior director of advocacy.

In letting the bill pass without her signature, Kansas Gov. Laura Kelly voiced "serious reservations" about it. 

"I believe it is fundamentally wrong to deny health coverage to anyone because they have a pre-existing condition," the Democrat said in a written statement. "It troubles me that only two other states in the nation have implemented a model similar to this bill, making the long-term impact uncertain."

Blue Cross and Blue Shield of Kansas and Minnesota-based Medica, which both sell exchange plans in Kansas, strongly opposed the Farm Bureau bill. Neither offered comment on the bill.

The Kansas Farm Bureau has not indicated what its new health plans will look like. Kansas Farm Bureau CEO Terry Holdren previously told lawmakers that premiums would be much cheaper mainly because the plans would be exempt from state and federal rules. The bill "would give us the ability to say no to folks if they don't meet our underwriting standards," he said.

But Flickner said the new Kansas plans likely will resemble those offered by the Iowa Farm Bureau, which allows anyone who pays the organization's annual dues to apply for coverage. The Kansas Farm Bureau and its third-party administrator will use medical underwriting to decide whom to cover and how much to charge, he added.

"We don't anticipate this will pull people from exchange," he said. "Our primary target audience is members we've been hearing from who are completely uninsured today, and some members who have gone on faith-based healthcare sharing programs."

In Iowa, applicants are asked if they have been treated in the past five years for any of 16 conditions, including diabetes; heart, lung, brain, blood or stomach issues; and mental health or addiction issues. There is a $3 million life cap on benefits for each member.

In addition, the Iowa Farm Bureau's outline of coverage states that monthly premiums may change midyear, based on changes in benefits and other factors. That's unlike standard, regulated health plans, whose premiums are locked in for the full benefit year.

"They can do whatever they want, and there will be no consumer protection," former insurance commissioner Praeger said. "That's going to be a shock to people. My guess is that people won't be fully informed when they buy these plans."

In neighboring Nebraska, the state Farm Bureau took a sharply different approach. It partnered with Medica to offer ACA-compliant plans solely to people involved in agriculture. No one can be denied coverage or charged more based on health status.

"The folks in Nebraska were facing the exact same challenge," said Dennis Maggart, president of the McInnes Maggart Consulting Group in Prairie Village, Kan. "But they didn't look for a legislative exclusion from insurance rules. They said we'll play by the same rules but just do it better. They hit the nail on the head."

Maggart is worried that the Kansas Farm Bureau plans will peel off younger, healthier people and sharply drive up premiums for ACA-compliant plans. He sees evidence of that in Iowa. There the monthly premium for a silver benchmark plan for a 40-year-old nonsmoker rose from $379 in 2017 to $713 in 2018 and $762 in 2019. 

"Why emulate something that's not working as well as what we're doing here in Kansas," he said. "It's going to be devastating to the exchange."

Praeger fears that the very people whom Kansas lawmakers intended to help will be denied coverage. The Iowa Farm Bureau itself cited a case where a couple who had been paying premiums of more than $2,700 a month for an ACA plan were able to buy a Farm Bureau plan for just $626 a month—except the wife didn't qualify based on pre-existing medical conditions.

"What kind of deal is that?" Praeger said. "It just won't work."

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