Health Insurance Experiment

A new farmers health cooperative provides more affordable coverage.

Health insurance remains complex, and farmers in most places don’t have new options, though Minnesota is trying out the concept of a farmer health-care cooperative, Image by Getty Images / iStock

Despite the continued political battles about the Affordable Care Act, or “Obamacare,” farmers in most of the country have been left largely with the same health insurance options this year. A new experiment in Minnesota, however, is focused on building a farmers health insurance cooperative.

The idea has been kicked around in the state since 2009, but it faced multiple regulatory stumbling blocks. At the end of 2016, Minnesota farmers complained to state lawmakers that the insurance exchange was collapsing. They were down to one insurance option across much of the exchange, and as many as seven counties in the state were looking at no insurance option. Lawmakers passed legislation specifically allowing farmers and their employees to form a health-care cooperative.

“It will fill a need in the individual marketplace for the people who have gotten hammered by the premium increases,” says Gary Wertish, president of the Minnesota Farmers Union. “This is where all the farmers fall, and this is an attempt to correct that.”

HOW IT WORKS. The cooperative, 40 Square, is a self-insurance plan that operates like most insurance policies. It comes with a deductible, copays and a percentage of out-of-pocket costs.

Deductibles and out-of-pocket costs are waived for routine preventive care, and there are standard costs for prescription drugs. A summary of 40 Square plans shows annual deductible options for families ranging from $3,000 to $13,100.

To sign up for 40 Square, a Minnesotan has to farm and have at least one common-law employee, who receives a W-2 for working on the operation. If the insurance is attractive, a farmer who is sole proprietor might consider working with an accountant to provide a seasonal contractor, or relative, with wages and taxes withheld. That would allow the farmer to issue a W-2 rather than treat that person as an independent contractor with a 1099 form.

“If your spouse does the books, and you issue him or her a W-2, you can consider the farm an employer with a common-law employee,” explains Charlene Vrieze, project manager for 40 Square.

The employee requirement comes because the insurance cooperative falls under a Department of Labor regulation dealing with employer-employee benefits.

Farmers purchase stock to join the cooperative, which amounts to a $100 voting share stock and a $1,000 common stock--paid throughout the first 12 months of membership in 40 Square. The cooperative requires farmers offer 40 Square insurance to employees for at least three years.

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“That’s a requirement by the state because the state wanted to see as stable a pool as possible because it’s new,” Vrieze explains.

Enrollment in the Minnesota plan parallels the national enrollment period for the Affordable Care Act, which ended Dec. 15.

SEEKING SOLUTIONS. Hoping to separate health insurance costs and encourage younger, healthier people to buy coverage, Iowa leaders had planned to ask the federal government for a waiver last year to allow the use of different pools of coverage. Gov. Kim Reynolds pulled the request when it became clear the federal government would not reach a decision on the waiver before enrollment began. Rate hikes in Iowa are considered high enough that roughly 20,000 people were expected to drop insurance coverage at press time.

The Midwest, as a whole, expected an array of rate hikes in the individual market. In Iowa, Medica announced average rate hikes of 32 to 48%. In Kansas, Medica’s rates proposed 16% increases for one plan and 29% for another. Missouri had proposed rate hikes of 35 to 42%. In South Dakota, the insurer Avera proposed a 20% increase for the individual plan.

While the rate hikes in the individual market sound daunting, the premium subsidy, or tax credit, offsets the rate increase for people making up to 400% of the national poverty level. That equates to health-exchange subsidies for incomes of up to $48,240 for a single person, or $98,400 for a family of four.

“A lot of people, when they hear the news or the noise machine, or whatever that premiums are going up, they think that affects everybody,” says Brenda Procter, an associate Extension professor at the University of Missouri’s Department of Personal Financial Planning. “But over 80% of people get some sort of financial assistance in the health insurance marketplaces. That’s based on their income, not on the height of the premium.”

Farmers and other businesses with fewer than 50 employees do not have to offer insurance. For those that offer insurance in non-grandfathered health plans, out-of-pocket costs for insurance are capped at $7,350 for individuals in 2018 and $14,700 for family plans.

Small businesses with under 25 employees that are in grandfathered or grandmothered plans may still want to check with a broker to see if it makes sense to shop through the Small Business Health Options marketplace. The tax credits work for companies with under 25 full-time employees who average about $50,000 or less a year in wages. The tax credit, which is refundable, can offset up to 50% of employees’ premiums. It can be even higher for companies with fewer than 10 employees who pay an average of $25,000 or less.

FAMILY GLITCH. However, for a lot of farmers and small businesses, an employee may be financially better off going to the exchange rather than accepting insurance through an employer.

If an employer offers insurance not just to the employee but to spouses and dependents, there could be a “family glitch” that hits the worker’s family. While insurance for the employee could be affordable, it may be too costly for the family. Unfortunately, the “glitch” means the employee’s family that is buying insurance on the health-care exchange wouldn’t be eligible for a tax credit to lower premiums.

“Many of them would actually be better off to go to the marketplace and get a plan there with financial assistance than if the farmer bought their health insurance,” Procter says. “It’s complicated, but what we are seeing is a lot of small businesses are trying desperately to offer insurance to their employees, and they are relieved to learn they may be helping their employees more if they don’t.”

For employers whose employees and their families fall into the family-income range for the tax credits to kick in, they could put their employees in a better financial position if the employees and their families were covered on the health-care exchange. That may not be the case, however, if families are making more than 400% of the poverty level.

NO RELIEF. There are farmer-employers finding no relief in the current health-care situation. Ben Riensche, owner and manager of Blue Diamond Farming Co., in Jesup, Iowa, employs six workers outside his family. He carries health insurance in a plan that was “grandmothered” into the Affordable Care Act.

At the end of 2017, Riensche says he was looking at a premium increase of 27% for 2018 coverage. And, that premium increase could jump to 45% for 2019. He’s stuck in his current policies because the closest other health-insurer bid for his business was 30% higher. A small tax credit doesn’t begin to offset the costs he faces, and employees expect businesses to offer insurance and manage that for the employee.

Riensche is frustrated with the way Obamacare has made it such a disincentive for a small business to hire and retain workers.

“The health-care system was less than perfect before Obamacare, and now they have totally broken it,” Riensche says. “How am I going to offer other young people a chance for a career in farming?”

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