A bill has landed on Iowa Gov. Kim Reynolds’s desk that will enable small businesses to band together to form association health plans that are exempt from the requirements of the Affordable Care Act (ACA). She is expected to sign it.
The bill merges two legislative efforts to sidetrack the ACA and provide less expensive health plans to Iowans. One is generic in that it allows small businesses and civic groups to form associations to create insurance plans that fall outside the normal regulatory process. The other effort is to allow the Iowa Farm Bureau Federation to create an association health plan with Wellmark Blue Cross & Blue Shield.
Because the plans fall outside the reach of the ACA, they don’t have to insure people with pre-existing conditions, and if they do, they can charge vastly more for the coverage. Maternity, substance abuse and hospitalization may also be excluded from the plans.
“I can tell you that actually, this is how it was before the Affordable Care Act,” said Sen. Mark Chelgren, R.-Ottumwa. “So we have tried this before. This is how the system worked. In the past, we gave choice to Iowans.”
Supporters predict the new plans could cover up to 30,000 Iowans currently without insurance. However, the only insurer in the state to offer plans on the ACA exchange, Medica, says it may file a lawsuit to stop the process, fearful that the plans will dry up its pool of healthy people and leave only the oldest and sickest on its rolls.
Association health plans are an initiative of the Trump administration. The president himself signed an executive order on the issue in October 2017, and the Department of Labor (DOL) followed up this January by issuing proposed rules to enable the plans to go forward.
Specifically, the DOL had to expand the definition of employer found in the Employee Retirement Income Security Act (ERISA) of 1974 to enable small businesses and civic associations to qualify for creating such health policies.
Consulting firm Avalere Health predicts that, if these plans become widespread, up to 4.3 million individuals could leave the ACA exchanges and small group markets, and it warns that this could have devastating effects.
“Changes that allow or incentivize healthier individuals to exit the individual and small group market to pursue other, sometimes non-ACA-compliant coverage offerings, could lead to higher costs for those sicker, less healthy individuals and groups who remain behind in the ACA regulated markets,” the study said.