Iowa insurance market collapse could ground young entrepreneurs' dreams, early retirees' plans

RED OAK, Ia. — The turmoil in Iowa’s health-insurance market is threatening to suffocate Joey Norris’ budding small-town business.

Norris, 27, is the picture of an American entrepreneur. He and two other young engineers founded a firm, Dream Forge, in his hometown of Red Oak in 2015. The company is starting to grow, but it soon could lose a key building block — the owners' ability to buy inexpensive health insurance under the Affordable Care Act while they get their dream off the ground.

Norris, an Iowa State University graduate, is one of more than 70,000 Iowans who are on the brink of losing health insurance policies that they buy on their own instead of obtaining them through an employer or government program. The three insurance carriers selling individual policies in most of the state have said they likely will pull out for 2018, because of financial losses and uncertain risks. As things stand now, the companies have until June 19 to file proposed rates if they plan to sell such insurance here for 2018.

Iowa Insurance Commissioner Doug Ommen expressed optimism this past week that he could work out a last-minute agreement with federal officials to offer incentives that would keep two of the three carriers — Medica and Wellmark Blue Cross & Blue Shield — in the market. Everyone recognizes the stakes, including for young entrepreneurs, he said. “We know it is an emergency, and we will deliver,” Ommen told independent insurance brokers in a Des Moines meeting Thursday. “…We are trying to thread the needle.”

Obamacare subsidies at risk

The collapse of Iowa's individual insurance market would mean people like Norris would no longer be able to use Obamacare subsidies to help cover their premiums. He now pays about $100 per month, and the federal government pays about $200 more. He needs the subsidy, because he’s taking only about $17,000 in salary per year from the fledgling engineering company.

“All of the money we make pretty much goes back into the business,” he said.

His firm helps inventors develop ideas into marketable products. Projects so far have included helicopter parts and a safety device that would prevent anyone but a gun’s owner from firing it. The young entrepreneurs hope to start hiring employees and move to a bigger office within the next year.

If Norris loses his individual health insurance policy, he could buy a small-business insurance plan, but the premiums could easily be triple what he’s now paying.

“That’s just going to take resources away from what we’re trying to do,” he said. Instead, he probably would close the company, leave Red Oak and find a corporate job that carries benefits.

Preventing such dilemmas was a key goal of the architects of former President Barack Obama's Affordable Care Act. They touted their reforms as a way to keep Americans from having to take or stay in undesirable jobs just for the insurance benefits. 

Could deadline be delayed?

Johnston insurance broker Janis Van Ahn said it would be a shame to see the insurance market’s turbulence force Iowans to give up ambitions of starting innovative small businesses. “That’s the great American story,” she said.

Van Ahn hopes federal and state government leaders will find a way to head off the collapse of individual insurance markets in Iowa and other states.

“I just can’t think that we’ll really let this go,” she said of the looming loss of carriers.

She said the June 19 deadline for insurance carriers to file 2018 rates could be extended through the summer while leaders hammer out a compromise, but they need to find a serious alternative soon.

Early retirees also worried

Young entrepreneurs aren’t the only ones whose dreams could be hamstrung by the insurance market turmoil. Iowans who want to retire in their late 50s or early 60s often rely on individual health insurance policies as a way to stay covered until they become eligible for Medicare at 65. A loss of insurance options could lead burned-out workers to delay retirement just so they can keep their benefits.

“It keeps people in jobs they don’t really want to stay in — that’s bad for them, and it’s bad for the employers,” said Jean Eichelberger of Polk City. It’s also bad for younger workers who could move into positions being vacated by retirees, she said.

Eichelberger is 61, and she’s winding down her career with part-time jobs after more than 30 years as a full-time administrative assistant for corporate and government executives. She pays $275 in premiums per month for an individual health insurance policy from Aetna. Her contribution is more than twice what she paid last year, but it’s still a relatively good deal. The federal government pays $368 per month in an Obamacare subsidy toward her premium.

Eichelberger’s subsidy could become useless if Aetna and the two other carriers, Medica and Wellmark Blue Cross & Blue Shield, stop selling individual policies in Iowa for 2018.

Partisan finger-pointing

Republicans and Democrats blame each other for the turmoil in the individual insurance market. Republicans contend the Affordable Care Act was hopelessly flawed, and they say the fast-rising premiums for individual policies could not be sustained. Democrats say President Donald Trump kicked the props out from underneath the market by refusing to commit to continuing federal support of its costs and by cheering on efforts to repeal Obamacare without offering clear guidance on how it would be replaced.

Former Obama administration official Katie Martin said the individual insurance market had been showing signs of stabilizing before Trump took office.

Martin said budding entrepreneurs were among the Americans whom architects of the law intended to help by creating a way to find and purchase individual insurance policies.

“It does liberate people to start off on their own ventures and follow their entrepreneurial spirit,” said Martin, who was a senior official at the Department of Health and Human Services under Obama.

The looming collapse of the individual health insurance market in places like Iowa  is "unconscionable,” Martin said. “It seems bad for the economy and bad for the future of our country.”

The U.S. House of Representatives, controlled by Republicans, passed a controversial bill May 4 that included some measures to address the concerns of carriers that were threatening to pull out of the individual insurance market. The ball is now in the court of the Senate, whose Republican leaders have said they’ll create their own health care reform bill. The process could take months, and skeptics wonder if leaders can come up with a compromise bill that could pass both houses of Congress.

Iowa’s two U.S. senators, Republicans Chuck Grassley and Joni Ernst, declined to comment in detail about whether they believe Congress can move quickly enough to head off the collapse of Iowa’s individual health insurance market.

In response to questions from The Register, the senators’ aides sent a brief, joint statement: “Sens. Grassley and Ernst are looking into the best possible options to help Iowans on the individual market for 2018. They understand the time-sensitive need for a resolution for the Iowans affected by Obamacare’s unaffordability and collapse in Iowa.”

The senators declined to say how they felt about a proposal from Iowa’s lone Democrat in Congress, Rep. Dave Loebsack. Loebsack wants to let people who live in counties without any individual health insurance carriers buy into an insurance pool based in Washington, D.C. That program is the insurance option offered to members of Congress and their staff members, and it could provide a temporary option for Iowans, Loebsack said.

"It's really the only way to go forward, I think," he said in an interview. He uses the program to buy a Blue Cross plan that clinics and hospitals in Iowa readily accept for medical services, he said.

He acknowledged that the idea amounts to a temporary stopgap. "We would rather, of course, not be in this situation," he said. 

Under Loebsack’s proposal, participants could use their Obamacare subsidies to help pay their premiums in the Washington-based insurance policies. That would be an advantage over other possible patches, including an expansion of Iowa’s high-risk pool. 

The high-risk pool is a vestige from pre-Obamacare days, when insurance companies were allowed to deny coverage to people with pre-existing health problems. Iowa could expand it to allow entry by consumers who lose individual coverage because their carrier pulled out of the state. But the insurance commissioner and others have cast doubt on that idea, noting that the premiums for coverage under the plan are 150 percent of standard rates and that Obamacare subsidies can't be used toward paying those costs. 

Eichelberger, the Polk City resident at risk of losing her Aetna policy, hopes someone will come up with a workable fix for next year. In the longer run, she wonders if the chaos in the private insurance system will lead more Americans to favor a single-payer alternative, in which the government offers a plan such as Medicare for everyone.

“Everybody has a right to health care,” she said, “and you shouldn’t have to fight like a dog to get it.”