Idaho Insurance Plans Violate Health Care Law and Require Federal Action

Update March 8, 2018: The Trump administration told insurers and regulators in Idaho that they cannot sell health plans that don’t comply with the Affordable Care Act. Specifically, the Centers for Medicare and Medicaid Services sent Governor Butch Otter and Idaho Department of Insurance Director Dean Cameron a legal memo stating that Idaho has not substantially enforced provisions of the Affordable Care Act under Insurance Bulletin 18-01, and that HHS has a duty to enforce and uphold the federal law if a state fails to do so.

Update March 8, 2018: Families USA sent a legal memo to the Department of Health and Human Services stating that the Idaho Insurance Department Bulletin 18-01 allowing the sale of non-ACA compliant “State-based” health insurance plans are unlawful and violates federal law under the Affordable Care Act. Families USA urged Secretary Azar and Administrator Verma to take pursuant enforcement action to uphold the Affordable Care Act in Idaho.

Update: On February 14, Blue Cross of Idaho filed health insurance plans for state approval that are not compliant with the Affordable Care Act. The “state-based plans” they propose, called Freedom Plans, are illegal under current federal law. Here’s how these plans differ from plans that comply with the the health law. They would:

• exclude coverage of preexisting conditions for up to a year
• vary premium prices based on an applicant’s health
• limit payments for medical care to $1 million per person annually
• only offer maternity coverage in some of their plans
• not cover pediatric dental or vision

New health insurance guidelines are a brazen effort to defy federal law

Idaho state officials are undertaking a dangerous course to create “state-based plans” for health insurance that will set a precedent for individual market insurance plans that could deny coverage for preexisting conditions. Members of Congress are calling on the Secretary of Health and Human Services and Administrator of the Centers for Medicare and Medicaid Services to act and uphold the protections provided under federal law.

The Idaho Insurance Director issued Bulletin No 18-01 outlining new provisions that would attempt to gut core federal insurance protections and allow health insurance carriers to sell cheaper, less comprehensive plans in Idaho’s Individual Market. These new guidelines follow an executive order that Governor Butch Otter and Lt. Governor Brad Little signed on January 5. That executive order directed the Department of Insurance to create new guidelines that would allow health plans to be sold to Idahoans in the individual market that are not required to comply with Affordable Care Act regulations, as long as those health plans meet state requirements, and the insurance carrier selling those plans offers an exchange-certified alternative in Idaho.

The state’s guidelines are a brazen effort to defy federal law. The Affordable Care Act remains in place, and therefore is the federal law that governs the individual markets across all states. It is true that states have the primary responsibility for monitoring the compliance and enforcement of the rules established under the Affordable Care Act that govern the individual market. And, states may impose additional requirements on insurance carriers and the health plans they offer, as long as the state requirements do not conflict with federal law, or prevent the implementation of federal market reforms.

The new guidelines, however, are a wholesale repudiation of federal law. They allow insurance carriers to sell a new type of plan called “state-based health benefit plans” or “state-based plans” as an alternative to the exchange-certified plans that are ACA compliant in Idaho’s individual market. Governor Otter and his administration argue that “state-based plans” would be more affordable for people who do not qualify for federal premium subsidies provided under the Affordable Care Act. It is not clear when or under what purported legal authority Idaho would begin allowing the sale of these plans since they do not comply with federal law and Idaho has not been granted a waiver to do this.

The Idaho health insurance guidelines put older and sicker residents at a disadvantage.

Members of Congress ask HHS to intervene

Members of Congress asked HHS Secretary Alex Azar and CMS Director Seema Verma to respond by February 20th to questions regarding the state’s compliance with federal laws and the department’s plans to enforce federal requirements.

These cheaper “state-based plans” would come at a cost to the consumer – less comprehensive benefit packages and fewer consumer protections in a plan that is cheaper only for healthy people. According to Idaho’s new guidelines, several benefits that are designated under the ACA as required Essential Health benefits – habilitative services (that help people with disabilities acquire a skill for daily functioning), and pediatric services including oral health and vision care – are not listed as required benefits for Idaho’s “state-based plans.”

Additionally, only some of the plans would cover maternity care. While other Affordable Care Act Essential Health Benefits are listed in the new guidelines, it is unclear how the Idaho Department of Insurance is defining the scope of each benefit category, bringing in to question the comprehensiveness of the benefit packages that insurance carriers could sell.

Proposal to offer cheaper plans that put older and sicker residents at a disadvantage

Idaho’s new guidelines also allow insurance carriers to deny coverage based on a preexisting condition if the individual does not have continuous prior coverage to enrolling in a “state-based plan.” That means that people seeking to enroll in health insurance who had been uninsured for the last two months or more, and who have a preexisting condition, would be denied coverage by insurance carriers selling these cut-rate “state-based plans.”

Since Idaho does not provide Medicaid coverage to low-income working adults, people who have a spell of poverty-level income are particularly vulnerable. They would be uninsured until their income rises above the poverty level, and then even when they earned enough to qualify for marketplace coverage, this provision could keep them from buying it.

In theory, people with preexisting conditions might retain the ability to purchase an exchange-certified plan – that is, a plan that is compliant with federal law – plan. However, the prices of those plans would rise much higher under this proposal. If Idaho insurance carriers begin selling cheaper, less comprehensive plans in the individual market, the lower-priced plans would divide the health insurance market, returning us to the pre- Affordable Care Act days when insurance carriers could sell “lower-cost” plans that eliminated critical benefits in order to attract healthier individuals to purchase those plans. As healthier people leave their existing health plan to purchase less comprehensive and cheaper plans, individuals and families who have preexisting conditions and require a more comprehensive benefit package would be left behind.

Individuals and families who manage to buy a state-based plan despite a health condition would be harmed in another way too: based on their health status, they could be charged premiums that are 50 percent higher than others buying the state-based plan. Idaho’s new guidelines differ from Affordable Care Act regulations on establishing premium rates based on health status and age. Under ACA rules, premium rates charged by an insurance carrier for health insurance coverage offered in the individual or small group market may vary based on age by no more than a 3 to 1 ratio, and they cannot vary by health status.

Idaho’s new guidelines will allow health insurers to charge older people much higher rates

Under the ACA, essentially, older individuals will pay no more than three times that of a younger person with the same type of coverage. However, under Idaho’s new guidelines for “state-based plans,” insurance carriers would be allowed to vary rates based on age by a ratio of 5 to 1 among individuals or dependents ages 20 and older, and for dependent children up to age 26, where a premium may be charged for each child. This provision means that older individuals could be charged up to 5 times more than an individual with the same type of coverage under their health plan. This amounts to a form of price discrimination based on age, or an age tax. And if they have a health condition in addition to being older, older people’s rates could be 7.5 times as high as a younger, healthier person.

Given that the new guidelines for “state-based plans” violate federal law, it remains unclear how Idaho will put forward the legality of these new guidelines. Otter and his administration are likely hopeful that the Trump Administration will turn a blind eye, particularly as the state is in the process of submitting a proposal to the federal government that could make changes to Idaho’s individual and small group markets, and to the Medicaid program. Advocates and health care leaders will be tracking both Idaho’s and the Trump Administration’s actions closely, and working to see that federal law is enforced both in Idaho and in other states.