Sen. Ron Wyden was losing his patience. Weeks earlier, Idaho’s state insurance regulator had proposed allowing the sale of health plans with weaker benefits than federal law requires. Now, the ranking member on the Senate Finance Committee wanted to know if the newly appointed chief of the Department of Health and Human Services would enforce the Affordable Care Act.
“Idaho is breaking a federal law,” Wyden, D-Ore., told HHS Secretary Alex Azar at a heated committee hearing in February for the agency’s budget. Azar would have to choose between protecting consumers from discrimination against pre-existing conditions, a cornerstone of the ACA, and letting the state-based plans enter Idaho's market, Wyden said.
But Azar would only commit to reviewing the plans once the state regulator approved them.
“I don’t want to prematurely be involved before there’s even a matter of controversy at the state level,” Azar responded. If Idaho Insurance Director Dean Cameron decides to allow the plans’ sale, “we will be looking at that very closely and measuring it up against the standards of the law, as is our duty,” Azar said.
Yet controversy may have already arrived in Idaho. Cameron’s proposal for state-based plans has attracted the attention of other state regulators and some health policy experts, in addition to at least four Democratic lawmakers.
One insurer, Blue Cross of Idaho Health Service Inc., has applied to sell five plans based on the proposal that are meant to be less expensive than plans fully compliant with the ACA, which requires all plans, not just ones sold on exchanges, to offer a minimum level of care for a set of benefits. The state regulator has said that the rising costs of ACA plans are driving Idaho's proposal for the new state-based plans.
The federal government moved in to enforce the law directly in four states — Texas, Oklahoma, Missouri and Wyoming — that said they would not adhere to the law when it was enacted, Georgetown University professor and health policy lawyer Sabrina Corlette said in an interview. As in Idaho, premiums in those states have shot up in recent years, with the price of silver-level exchange plans rising about 124% in Oklahoma from enrollment years 2015 to 2018. Premiums rose more than 65% in the other three states during that time.
If Idaho approves the state-based plans for sale, and the federal regulator does not step in, a precedent may be set for other states to disregard some of the ACA’s rules. Several state insurance departments that resisted the ACA's initial implementation declined to comment on Idaho's proposal.
“This is in uncharted waters,” Corlette said of the federal government's next move. “This is pretty unprecedented.”
The proposal would allow insurers to offer less-expensive plans by underwriting policies based on the riskiness of patients, as most other kinds of insurance outside the managed care space are written. Before the ACA became law, risk-based underwriting for health insurance often meant that consumers with medical conditions had to face limited or very expensive coverage.
The Blue Cross of Idaho plans include a questionnaire consumers must fill out that asks about their medical history and pre-existing conditions. Nothing in the ACA prevents an insurer from asking enrollees to answer those questions, which many insurers do post-enrollment to connect consumers with providers.
But using the answers to help determine how much to charge would be illegal under the ACA, Corlette said in an interview.
"It's not the health questionnaire itself that is illegal, it's how it's used," Corlette said. "It's okay as long as they're not changing your premium or changing your benefit design in response to your answers."
The five plans that Blue Cross of Idaho filed appear to be updated versions of plans the insurer sold in 2006, before the ACA was in effect, Corlette said.
Richard Epstein, a legal consultant to Blue Cross of Idaho and a law professor at New York University, admitted in an interview that the insurer's state-based plans are not compliant with the ACA. He noted that in order to offer the state-based plans, a company must also continue to offer plans that include all ACA-required benefits and coverage. "This is a supplement, not a replacement" of ACA plans, he said.
Blue Cross of Idaho's new plans would underwrite policies like traditional insurance, and that means taking all the risk factors of a patient into account, Epstein said.
"Every known principle of insurance is violated by the Obamacare program," Epstein said, referring to the ACA.
Edmund Haislmaier, a health policy analyst at the conservative-leaning Heritage Foundation, said in an interview that the proposal is not a "radical deregulation," instead calling it a viable alternative to the individual market.
Haislmaier argued in favor of reintroducing the idea of risk-based underwriting to the individual, off-exchange health insurance market. Pooling together populations of people who regularly use insurance because of chronic conditions with healthier populations that do not file claims as often has disrupted a market that used to appropriately underwrite products for both groups, he said.
"There's clearly a demand for some kind of solution," Haislmaier said.
Finding a way to lower consumers’ costs for obtaining health insurance lies at the heart of the state-based plan proposal. Under the direction of Idaho Republican Gov. C. L. “Butch” Otter, Insurance Director Cameron’s proposal was meant to bring premiums under control by allowing insurers to lessen their policies’ benefits.
Dave Jeppesen, Blue Cross of Idaho's executive vice president for consumer healthcare, sales and marketing, said the company examined the issue "through many lenses" and concluded that the ACA’s system of “cooperative federalism” meant that states are the primary regulators.
"The state is our regulator, and we’re responding to the new state-based guidelines," Jeppesen wrote in an email to S&P Global Market Intelligence.
The company's aim is to solve a problem for 110,000 uninsured "middle-class Idaho families whose only choice is going without coverage,” he wrote. A company spokesperson said Blue Cross of Idaho estimates about 17,000 consumers will enroll in the plans.
Enforcing the law
The Idaho policies may defy the ACA in other ways, Jennifer Osborn Nix, a health insurance compliance attorney for the law firm Polsinelli, said in an interview.
The proposal would allow insurers to raise premiums for family members within a family policy based on the individuals' health conditions, rather than charging one flat premium for a family policy — another violation of the ACA's pre-existing conditions protection.
The proposal also states that insurers can impose an annual limit on how much money a consumer can claim. After exceeding a $1 million threshold in one of the state-based plans, a consumer would be transferred to an on-exchange plan. Such cancellations or transfers are illegal under the ACA, Nix said.
"The guidance, as laid out by the department, [and] the requirements, do not comply with what the requirements are for the ACA," Nix said. "If state requirements are not as stringent as the federal law, federal law would preempt that."
The Idaho proposal has also drawn the ire of New York’s primary insurance regulator, Department of Financial Services Superintendent Maria Vullo, who wrote in a blistering statement that Idaho's decision violates federal law and called on the federal government to intervene.
The sale of the plans violates state regulators’ pledge to “provide essential health benefits to everyone and not permit the destabilizing effects of adverse selection, cherry picking of risk, and a race to the bottom in consumer protection," Vullo wrote.
When reached for comment, Weston Trexler, a bureau chief for Idaho's insurance department, did not respond to Vullo's statement but said that the ACA has exceptions that allow for plans with fewer coverage options.
Trexler said in an interview that Idahoans have been "priced out" of obtaining affordable health insurance. Many consumers could turn to more affordable alternative health plans, which may provide much less comprehensive coverage, he said.
For now, observers are awaiting an official approval or denial of the plans from Idaho’s insurance department, after which Secretary Azar said he may examine the plans’ legality. Since the plans adhere to Idaho’s own proposal, the state will likely approve them, leaving it to Azar or the Centers for Medicare and Medicaid Services to decide whether to enforce the ACA's protections in Idaho.
And there are other states with similar problems to Idaho, where costs are rising and consumers are pressing for change, Epstein noted. "Idaho is at the tip of a very large iceberg," he said.