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By Mark Tosczak

(UPDATED) Legislation poised for passage in the N.C. Senate would allow nonprofits to offer “health benefit plans” that would be exempt from nearly all state and federal regulations that govern health insurance.

Supporters say the measure would allow nonprofits to offer health benefit plans that would be similar to health insurance, but could be cheaper than health insurance purchased on the Affordable Care Act exchange as well as other forms of insurance.

But critics worry the legislation would open the door for products that would discriminate against those with pre-existing health conditions, offer skimpy benefits, and come with few or no consumer protections.

The plans would be similar to those offered in Tennessee, where premiums on the ACA exchanges have climbed precipitously, in part because of the impact of these unregulated plans.

UPDATE (6/14 – 8pm): After easy passage in the Senate Thursday evening, HB933 was bounced back to the House of Representatives for concurrence, where it failed on a 38-53 vote. Multiple House members cited the fact that the bill had been presented late in the legislative calendar and they felt they needed more information before giving it a green light.

“I do think this particular bill warrants more study to assure we will not be further victimizing persons with pre-existing conditions,” said Rep. Terry Garrison (D-Henderson).

Multiple members noted that the bill would not have gone into effect until Jan. 2020, and that next year’s long legislative session would be a better time to examine the insurance scheme.

“This might be the best idea since sliced bread,” said House Health Committee co-chair Rep. Donny Lambeth (R-Winston-Salem). “But I’m not quite ready to say ‘yes.'”

Sen. Ralph Hise (R-Spruce Pine) said in the Senate Health and Human Services Committee meeting Wednesday that HB 933 would provide more affordable health care options than are now available through plans sold on the ACA exchange.

“This provides a better option to provide health care, particularly for those who are self-employed and others who are facing tremendous premiums that may far exceed their health care costs,” he said.

The legislation would allow nonprofit organizations that have existed for at least 10 years, and which offer membership in all 100 counties, to offer their members health benefit plans. Unlike other health insurance plans and coverage offered by employers, these benefit plans wouldn’t be required to cover a minimum set of health care services. And plans could be priced at different levels so that people with pre-existing health conditions would be charged more or else not have their pre-existing conditions covered.

“It creates a false sense of security,” said Peg O’Connell, a lobbyist for a number of public health organizations, including the American Cancer Society. “If you think you’ve got insurance and you don’t, or you think you’re insured for something like cancer or heart disease. And then you file a claim and they suddenly say, ‘That was a pre-existing condition, we’re not going to cover it’ or ‘We might not cover it for a year, like we did before the Affordable Care Act was passed.’”

A late amendment added during a committee meeting Tuesday delays implementation of the law until Jan. 1, 2020.

Tennessee model

The legislation would allow the North Carolina Farm Bureau to offer health plans to its members. The company told North Carolina Health News last week that it hoped to offer a so-called “association health plan” if the federal government issues new rules, now under review, that would relax restrictions on such plans.

But, company President Larry Wooten said, issuing its own health plan would only be possible if it wasn’t subject to ACA regulations that prohibit charging different people or even different groups of employees in small companies different premiums due to health conditions. If the federal rules didn’t allow that, Wooten said, then state legislation might allow it.

HB 933 appears to be that legislation.

Wooten cited plans offered by the Tennessee Farm Bureau that cover about 25,000 people in that state. For some customers, the Tennessee plans offer far lower premiums than can be found on that state’s ACA exchange plan, in large part because the Farm Bureau plans aren’t required to follow ACA regulations on what’s covered and how premiums are determined.

The plans also have features that were more common before the ACA such as waiting periods for coverage of pre-existing conditions and extensive health questionnaires for applicants, and older people and those with pre-existing health conditions may face higher premiums than younger, healthier customers.

Impact on exchanges

The Tennessee Farm Bureau plans don’t have to follow ACA regulations thanks to a loophole created by Tennessee legislators in the early 1990s, when lawmakers explicitly said Farm Bureau health plans weren’t health insurance under state law. HB 933 would perform a similar legislative maneuver, exempting association health plans from most of the state’s health insurance regulations.

Many health policy experts think the Tennessee Farm Bureau plans are hurting that state’s ACA exchanges, driving up premiums and making them less stable, said Zack Buck, a law professor at the University of Tennessee-Knoxville College of Law who focuses on health law.

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Healthier people are able to get cheaper policies from the Farm Bureau, so they buy those, Buck said, making the pool of people covered in exchange plans less healthy overall, and driving up premiums. Since most people who are covered under ACA exchanges receive subsidies, this could also increase government spending on exchange plans.

“Tennessee is a terrible ACA exchange marketplace,” Buck said. “Nashville has tremendously high premiums compared to lots of other cities of similar size.”

For a few months last year, he said, east Tennessee didn’t have any insurers offering plans on the exchange. Tennessee’s exchange “is  probably one of the worst five or 10 in the country,” he said.

But unlike in Tennessee, where the Farm Bureau is the only organization subject to the loophole that exempts it from most health insurance regulations, the North Carolina legislation could open the door to many groups also offering health benefit plans.

“Authorizing the formation of association-sponsored health benefit plans is a step in the right direction towards driving health care value and will particularly help small businesses work toward the cost predictability they so desperately need,” said Gary Salamido, vice president of government affairs for the N.C. Chamber of Commerce, which represents businesses across the state. “We look forward to continued discussions on this legislation.”

Others feel the legislation needs more discussion.

“For the provision in Section 6 that would allow for nonprofit organizations to create health benefit plans that are exempt from federal and state regulation, we think this needs more study and should be deferred to the 2019 long session,” said Barry Smith, a spokesman for the N.C. Department of Insurance.

ACA fate uncertain

HB 933 comes as the Trump administration continues to take steps that many believe are weakening the Affordable Care Act. Last week, the U.S. Justice Department said it wouldn’t defend the ACA’s individual mandate, which requires individuals to purchase health insurance, against a lawsuit filed by attorneys general from Texas and 19 other states.

Starting next year, there will be no tax penalty for individuals who don’t follow the individual mandate. Last fall, after the Congress failed to repeal the ACA outright, the Trump administration said it would end cost-sharing reduction payments to insurers, further increasing premiums. And this week the Justice Department argued in court that the ACA’s ban on charging higher premiums to people with pre-existing conditions are invalid.

Buck, the Tennessee law professor, said despite the elimination of what many health care policy experts felt were key provisions of the ACA, the exchanges have proven surprisingly resilient.

“We thought, we need this stuff. All these building blocks are necessary,” he said. “And now the question is, you know, it’s like Jenga, how many can you take out before the thing falls over.”

HB 933 easily passed its first hurdle in the state Senate late Wednesday and will likely be given final approval in that chamber Thursday.

Mark Tosczak

Mark Tosczak has worked as a writer and communications professional for more than 20 years, including stints as a newspaper reporter and editor, think tank communications director, marketing agency vice...