Iowa Obamacare Waiver Would Mean High Insurance Deductibles

There is a lot of confusion over the likely fate of Iowa’s application for a major “super-waiver” from the provisions of the Affordable Care Act, allegedly an emergency measure caused by the flight of insurers from the state. The Washington Post reported last week that Donald Trump himself had instructed the Centers for Medicaid and Medicaid Services (CMS) to reject Iowa’s waiver bid because he wasn’t interested in shoring up Obamacare. Iowa Governor Kim Reynolds has disputed this account and says her state is working closely with CMS to make the waiver workable. We’ll know who’s right soon enough, since Iowa needs to begin working at a breakneck pace to implement the waiver if it’s granted. But if it’s granted, it will represent a dangerous experiment, from both a policy and a political point of view, in the long-standing conservative dalliance with high-deductible health insurance.

Iowa is pursuing a so-called Section 1332 waiver under a provision of the Affordable Care Act that allows states to “innovate” with plans that suspend specific Obamacare rules but achieve ACA’s overall goals of expanded affordable health care for all. Its plan largely sacrifices most of the structure of ACA in order relentlessly to head off a big premium increase planned by the one remaining private insurer participating in the Obamacare markets in the state. A big chunk of that premium increase is attributable to the Trump administration’s unwillingness to guarantee insurers reimbursement for so-called Cost Sharing Reduction subsidies to hold down out-of-pocket expenses for low-income consumers. But since Iowa can’t do anything about that, it is instead proposing to get rid of the CSR subsidies for all but its very poorest citizens, while completing rejiggering Obamacare’s tax subsidies for insurance premiums to make them available all the way up the income scale.

The bottom line, according to the New York Times, would be to keep down premium increases “for the 72,000 Iowans who currently have Obamacare health plans, including 28,000 who earn too much to get subsidies to help with the cost.”

But the cheaper premiums would come with a big trade-off: higher out-of-pocket costs. The only option for customers would be a plan with deductibles of $7,350 for a single person and $14,700 for a family. The proposal would also reallocate millions of federal dollars that the health law dedicates to lowering costs for people with modest incomes and use the money for premium assistance to those with higher incomes, no matter how much money they make.

This approach is certainly in conflict with the Affordable Care Act’s heavy emphasis on providing comprehensive health insurance with limited out-of-pocket costs, and to that extent if the waiver is approved it could face a robust legal challenge. But it is faithful to an abiding conservative policy interest in high deductibles as a way to promote “market principles” in health care policy.

Indeed, the central idea of most conservative health care plans is to encourage consumers to save money for routine services, ideally through tax-preferred health savings accounts, and then to hedge against disaster via high-deductible, catastrophic insurance plans. This reflects a strongly held belief that over-utilization of health services, and too little bargaining by consumers, is at the heart of high health care costs. High deductibles also serve the needs of healthy people who should not, according to many Republicans, be forced to pay higher premiums to offset the costs incurred by those who have not lived as virtuously.

Most Americans do not, however, like high deductibles or other out-of-pocket costs; their steady expansion is perhaps what they most dislike about Obamacare’s individual insurance markets. And Iowa’s approach seems designed to make consumers hate conservative health policy even more: a one-size-fits-all high deductible plan with very little in the way of subsidies to deal with out-of-pocket costs.

If Donald Trump knew a lot about health care policy instead of a little, this realization might explain a decision to place a thumb on the scales against granting Iowa’s waiver. As it is, CMS and its director Seema Verma will have to decide whether to let a Republican-run state obtain an waiver that applies Republican principles in a way that not only turns much of the Affordable Care Act upside down but threatens to be a lot less popular than Obamacare.

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