Can Tennessee’s U.S. senators help healthcare consumers?
State faces challenging market
A new bill filed by U.S. Senators Lamar Alexander and Bob Corker could give some relief to Tennesseans who are facing a bleak individual health insurance market in 2018. Called “The Health Care Options Act of 2017,” the bill aims to do two things. First, it aims to waive the federal penalty for individuals who don’t get qualified coverage because no carrier offers it on the exchange in their county. Second, it aims to allow individuals to apply any federal subsidy for which they qualify to non-qualified and off-exchange health plans.
It is not a coincidence that this bill is sponsored by the senators from Tennessee. The dynamics of the individual health insurance market in Tennessee are extremely challenging right now and the state is at risk of not having any options on the exchange at all in 2018.
Why is that?
Because the insurance companies are losing too much money. Humana announced in February it is leaving the ACA exchanges nationally in 2018. For 16 counties in East Tennessee, Humana was the only carrier left that offered plans on the exchange. The rest of the state isn’t in much better shape. Cigna is the only carrier that offers plans on the exchange in Nashville and Memphis. Many rural counties are down to just BlueCross BlueShield.
If Cigna and BlueCross BlueShield follow Humana’s lead and exit the market statewide, more than 200,000 Tennesseans will lose their coverage. Farm Bureau Health Plans offered qualified plans in 2017, but it has never offered them on the exchange and so they did not qualify for federal subsidies. Furthermore, there is no reason to believe it would continue to offer qualified plans at all if everyone else leaves the market.
Senator Alexander and Senator Corker are being proactive in thinking about a scenario where the ACA is not repealed and Tennesseans find that no insurance companies end up offering a qualified health plan in their county.
Everyone stops offering qualified plans
If no carrier offers qualified plans in a given county in 2018, then Tennesseans in that county who have pre-existing conditions would not be able to get health insurance because none would be available to them. “The Health Care Options Act of 2017” would help these people because it would waive the federal penalty that they would otherwise have to pay under the ACA for not buying a qualified health plan.
In this scenario, Farm Bureau Health Plans would likely continue to offer non-qualified plans. These plans have underwriting, which means that if you have pre-existing conditions you can be declined. “The Health Care Options Act of 2017” would help people who are able to buy one of these plans in two ways. First, it would waive the federal penalty they would otherwise have to pay for not buying a qualified plan. Second, it would allow them to apply any federal subsidies for which they qualify toward the cost of the plan. Currently, federal subsidies can only be applied to the cost of qualified plans.
Farm Bureau Health Plans is uniquely positioned to be able to offer non-qualified health plans. It is only able to do so because it is classified as a rural health organization. The main drawback to buying these plans over the last few years was that the consumer would still be subject to the penalty for not buying a qualified plan.
So while the plans were a lot less expensive because they were able to decline consumers with pre-existing conditions, that had to be weighed against the penalty one would have to pay. “The Health Care Options Act of 2017” would waive that penalty as long as no qualified plan was available in the consumer’s county. It would also allow federal money to be used to pay for these plans. As a result, healthy consumers and Farm Bureau would likely both do well in this scenario.
Consumers with pre-existing conditions would not do well. Depending on how motivated these consumers are to get health insurance, some may move to a county where qualified health insurance options are available. This would not be good for a health insurance company who had continued offering health insurance in a given county because it thought it understood the county’s population and risk profile. If sicker people suddenly began moving so that they could buy health insurance, what the insurance company thought it knew would turn out to be wrong.
Tennessee may find that to help consumers with pre-existing conditions, it needs to act at the state level. One option would be to fund a state-operated reinsurance program. Tom Price, secretary of the Department of Health and Human Services, published a letter to governors in March outlining his agency’s plan to work with states on these programs.
Price said HHS would assist states with possible federal funding, and cited Alaska’s program, which the state passed last year to offset high premium increases. Just last week, Minnesota appropriated $542 million of state funds to stabilize its insurance market.
Whatever happens, Senators Alexander and Corker noted that systematic reforms are needed to improve insurance competition in Tennessee and elsewhere. The Health Care Options Act of 2017 is designed to be a temporary measure in case those systemic reforms don’t happen soon. Hopefully they will, and Tennessee consumers won’t face these challenges next year.
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