Holes in Rural Insurance

By Marcia Zarley Taylor
DTN Executive Editor

SAG HARBOR, N.Y. (DTN) -- During year-end meetings with farm clients, Minneapolis-based consultant Rod Mauszycki, heard farmers pose a question the veteran tax adviser had never heard before, "What's the penalty for not carrying health insurance next year?"

"Many farm families are getting charged $20,000, $30,000, or even close to $40,000 in premiums and out-of-pocket costs before their insurance kicks in," said Mauszycki, a principal with CliftonLarsonAllen LLP's agribusiness and cooperative group. "The federal penalty of $1,000 to $2,000 is relatively minor. If they don't get sick, they just saved $20,000 to $40,000."

"Now is a difficult financial time for U.S. agriculture when farmers are breaking even at best," he added. "Banks are pressuring them to cut expenses or pay down debt, so some farmers are deciding to put their business needs before their personal needs."

No matter that Congress is debating the repeal and replacement of the Affordable Care Act, a political exercise that could take months or even years to clarify details. Major insurance companies are abandoning individual policy coverage that has been the gold standard for self-employed business owners and farmers nationwide. Many American farm families now face an immediate health care crisis: Their net farm incomes have plummeted in the most severe farm recession since the 1980s, just as the cost of private insurance is soaring.

According to USDA, roughly half of the nation's farm families access health care coverage through a spouse who works off-farm. The remaining typically buy private insurance through an agent or broker, but that has subjected them to escalating costs without the benefit of tax subsidies lower-income individuals can tap on their state exchanges.

In Minnesota, MNsure, the state-sponsored insurance exchange, once had five companies competing for business. But for 2017, Blue Cross Blue Shield announced it was discontinuing all 103,000 health plans to individuals, including policies sold on MNSure, and those purchased privately through brokers or agents. That left only one other MNsure insurance provider for rural residents outside the Twin Cities. The alternate provider quickly capped its sales at 43,000 customers, however, leaving many rural policyholders in the cold.

The lack of competition for individual coverage isn't just limited to Minnesota. United Healthcare exited 34 state exchanges in 2017. So many insurers fled the individual government insurance marketplace that participation in states using Healthcare.gov in 2017 reporting just one vendor included Alabama, Alaska, Oklahoma, South Carolina and Wyoming, according to the Kaiser Family Foundation. Some states reported more than one carrier, but as rural residents have discovered, network coverage is spotty, often requiring drives of 50, 100 or 150 miles to stay within their approved-provider list.

In its defense, Blue Cross Blue Shield of Minnesota reported a loss of $265 million on insurance operations from individual market plans in 2015, saying claims for medical care far exceeded premium revenue for those plans. It projected a total loss of more than $500 million in individual health plans if trends had continued over the next three years.

As an alternative, Blue Cross Blue Shield of Minnesota offered slimmed down HMO-type plans which exempted most major hospital centers from its network, including the Mayo Clinic, medical centers in St. Cloud and the University of Minnesota.

"Because virtually every service in western Minnesota is 'out-of-network' now, your $5,000 family out-of-pocket maximum automatically became a $10,000 out-of-network maximum," said Kyle Goeman, an insurance agent in Clara City, Minnesota, who specializes in health coverage. When premiums are added on top of that, "Our clients kept telling us, 'This is ridiculous.'"

In the last few days, both the Minnesota Senate and House of Representatives approved bills that would subsidize $300 million of premiums for approximately 123,000 Minnesotans who buy insurance on the individual marketplace but do not qualify for federal tax subsidies. Differences in the bills remain, but the compromise is likely to offer premium rebates of 20% to 30% per policyholder. It may disqualify high-income individuals, depending on how the bill fares in conference committee.

A provision sponsored by state Representative Tim Miller, a Republican from southwest Minnesota, would allow farmer health-care co-ops to sell insurance to their members and employees, presumably acquiring better group rates than individuals can achieve solo now. With a community focus, those co-ops could also add local medical practitioners and hospitals back into a network-approved system, Miller said.

"As it stands now, if someone has a heart attack in Renville, Minnesota, the local county hospital says it would have to air lift them [137 miles] to Sioux Falls because certain critical care procedures are out-of-network," said Miller.

For farmers, the turmoil in health insurance comes at a time they can least afford it. Farmers enrolled in the Minnesota's farm business recordkeeping system already have been paying more for health care than groceries the last few years. The median farm business member in southwest Minnesota reported net farm income of $60,000 in 2015, down from an all-time peak of $377,000 in 2012.

For farm families who buy private coverage without a tax subsidy on their state exchanges, policy costs have soared again this year. In Illinois, for example, premiums for nonsubsidized plans jumped 45% to 59% this year. That's crimping farmers' ability to pay: After averaging net farm incomes of $180,000 from 2006-2014 during corn's glory days, the average Illinois Farm Business Farm Management member with 1,500 corn and soybean acres reported a loss of $2,791 in 2015, with only a slight profit now projected for 2016, according to the University of Illinois.

In Minnesota, some low-income farmers could legitimately qualify for the state's "free" Medicaid coverage, said Goeman and Mauszycki. The problem is that the state files a lien against the insured's estate if they're over 55, so upon death it can recover the public's expenses.

For asset-rich but cash-poor farms, that "free" insurance can be more expensive than paying the full freight for private health insurance, Mauszycki warned.

Marcia Taylor can be reached at marcia.taylor@dtn.com

Follow Marcia Taylor on Twitter @MarciaZTaylor

(AG/SK)

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