Two ways 40,000 Iowans could lose their health insurance

At least 40,000 Iowans are in danger of losing their health insurance later this year, and not only because of the King v Burwell case before the U.S. Supreme Court. Regardless of how justices decide that case, Iowans could lose access to federal subsidies they need to buy insurance policies.

State legislators and Governor Terry Branstad could eliminate the risk by working together to establish a fully state-run health insurance exchange this year. But for reasons I can’t comprehend, I see no sense of urgency to prevent a potentially devastating outcome for thousands of families.  

According to the latest estimates, 45,399 Iowans have purchased health insurance through the federal website Healthcare.gov. Roughly 85 percent of them (38,500 people) receive tax credits or other cost-sharing subsidies to help pay the insurance premiums. Few people who qualify for the subsidies could afford to pay the full cost of health insurance without federal assistance averaging hundreds of dollars a month.

Even worse, eliminating subsidies for Americans who buy health insurance through the federal exchange would have ripple effects through the entire insurance market. A recent study by the non-partisan Urban Institute found that in the absence of federal subsidies, so many individuals would be forced out of the market that health insurance premiums for those remaining in the system could increase by 35 percent. That could price out many people who can currently afford insurance without federal subsidies.

So 40,000 Iowans is a conservative estimate for how many people could lose coverage if federal subsidies disappear. The number could climb much higher.

This morning, the U.S. Supreme Court heard oral arguments in the King v Burwell case. Plaintiffs argue that four words in the 2010 Affordable Care Act indicate that Congress intended for federal subsidies to be available only to people living in states with their own health insurance exchanges. Never mind that almost everyone involved in Congressional debates over the bill, including Senator Chuck Grassley and many Republican staffers, understood that subsidies would be available to people who purchased through the federal exchange.

Iowa Attorney General Tom Miller signed on to a multi-state brief urging justices to reject the plaintiffs’ arguments. Many other “friend of the court” briefs on both sides are available at the SCOTUSblog.

I have no idea how the Supreme Court will come down in King v Burwell. Chief Justice John Roberts and Justice Anthony Kennedy are widely viewed as the “swing votes” in the case. Both can be ideological conservatives but can also be “results-oriented,” deviating from what you might expect based on their track record. Many believe that either Roberts or Kennedy will balk at handing down a ruling that would deprive more than 8 million people of their health insurance. Alternatively, these corporate-friendly justices may be persuaded by the major corporations that have filed briefs supporting the government’s position. They may simply punt on the grounds that the plaintiffs lack standing to file this lawsuit (see here and here).

If the Supreme Court majority ends up siding with the Obama administration, a wave of media coverage will declare that health insurance is safe for the millions of Americans who rely on federal subsides.

Trouble is, that won’t be true for Iowans.

Since the non-profit CoOportunity Health was taken over by the Iowa Insurance Division in December, Coventry has been the only company selling health insurance to Iowans through the exchange. CoOportunity has since been liquidated, and most of its members purchased policies from Coventry.

CoOportunity failed in part because its members turned out to be relatively unhealthy and therefore expensive to cover. Now thousands of those customers have been dumped on Coventry. Why would that corporation continue to offer policies to Iowans through the exchange?

I put the question to Becky Blum of the Iowa Insurance Division. She pointed out that Coventry is a huge national company owned by Aetna, and therefore has enormous cash reserves unavailable to to CoOportunity, a new coop serving only customers in Iowa and Nebraska.

While I understand that Coventry has the reserves to absorb some losses in Iowa, even a large corporation doesn’t typically throw away money for no reason. Coventry is not locked into continuing to offer insurance to Iowans through the exchange for next year. Executives didn’t know CoOportunity would fail when they decided to keep selling policies here for 2015.

If Coventry backs out, I can’t see why any other company would leap at the chance to cover 40,000-plus Iowans who are, as a group, less healthy than the general population. Wellmark Blue Cross/Blue Shield controls at least three-quarters of Iowa’s individual insurance market, and most of their existing customers signed up when it was still legal to exclude people with pre-existing health conditions.

The Affordable Care Act stipulates that subsidies are available only to people who buy health insurance through the exchange. If no insurance companies choose to sell to Iowans through Healthcare.gov, Iowans will lose access to those subsidies, no matter what happens in King v Burwell.

Couldn’t the Iowa Insurance Division force Wellmark or some other company to offer health insurance through the exchange? Some state insurance commissioners have required corporations to sell on the exchange if they control a certain percentage of the market. When Bleeding Heartland discussed state government’s role in CoOportunity’s failure, I criticized Iowa Insurance Commissioner Nick Gerhart for letting Wellmark stay off the marketplace.

I later learned that Gerhart lacks that authority, because Iowa opted to create a “partnership” exchange with the federal government rather than a fully state-run exchange. Blum told me that Iowa Insurance Division officials hope Coventry will continue to offer insurance through the exchange. However, they have no leverage to force them or any other company to participate.

To her credit, then Iowa Insurance Commissioner Susan Voss tried to convince state officials that Iowa needed its own health insurance exchange during the two years after the Affordable Care Act went into effect. Her efforts made no headway with Iowa House Republicans; House Speaker Kraig Paulsen was more interested in scoring rhetorical points against “socialized medicine.” Iowa Senate Democrats considered two approaches to setting up a state-based exchange (here and here), but neither cleared the upper chamber during the 2011 session. The following year, Governor Terry Branstad decided that a partnership exchange would allow state government “to retain autonomy over Iowa’s healthcare system and minimize costs.”

The limits of that “autonomy” are clear. State officials cannot guarantee that Iowans who qualify for federal subsidies will have even one provider to sell them health insurance for 2016.

Fixing that problem should be one of the top priorities for the 2015 session. Creating a state-run exchange would incur some costs and logistical challenges, yet few issues occupying the legislators’ time could affect people’s lives as profoundly as going from insured to uninsured. Lawmakers will likely adjourn for the year before the U.S. Supreme Court announces its ruling in King v Burwell, and well before Coventry reveals whether it will continue to offer policies to Iowans through Healthcare.gov.

To my knowledge, no one has introduced a bill this year on creating a state-based health insurance exchange, but that could change, especially if Governor Branstad were willing to work with lawmakers on the issue. The alternative is to do nothing and leave access to health care for 40,000 Iowans at the mercy of nine Supreme Court justices and a few Coventry insurance executives.  

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