Health Insurance Confusion

Few Changes for Most Farmers, But Minnesota Testing Farmer Health-Care Cooperative

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Health insurance remains complex and farmers in most places don't have new options, though Minnesota is trying out the concept of a farmer healthcare cooperative. (DTN file photo)

OMAHA (DTN) -- Despite the continued political battles over the Affordable Care Act, or "Obamacare," it remains the law, the marketplace for insurance still exists and enrollment starts Wednesday.

Farmers in most of the country are left largely with the same health-insurance options they have faced in the past when it comes to the law, though a new experiment is starting in Minnesota with a farmer health-insurance cooperative.

The idea of a farmer health-care cooperative had been kicked around in Minnesota since 2009 but had faced multiple regulatory stumbling blocks. At the end of last year, Minnesota farmers complained to state lawmakers that the insurance exchange was collapsing 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. Minnesota lawmakers passed legislation last spring 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," said 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, called 40 Square, is a self-insurance plan that operates like most insurance policies 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 offers annual deductible options for families from $3,000 to $13,100 in different plans.

To sign up for 40 Square, a Minnesotan has to farm and have at least one common-law employee -- a person who receives a W-2 for working on the farm. If the insurance is attractive, a farmer who is a sole proprietor might consider working with an accountant to provide a seasonal contractor, or relative, with wages and taxes withheld 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," said Charlene Vrieze, project manager for 40 Square.

Farmers require an employee because the cooperative is regulated under a Department of Labor regulation dealing with employer-employee benefits.

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

"That's a requirement by the state because the state wanted to see as stable a pool as possible because it's new," Vrieze said.

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Enrollment in the Minnesota plan parallels the national enrollment period for the Affordable Care Act, which starts enrollment Nov. 1 and ends Dec. 15.

The Trump administration continues to blast Obamacare with the Department of Health and Human Services issuing a report Monday to that extent.

"This data demonstrates just how rapidly Obamacare's exchanges are deteriorating with skyrocketing premiums year after year, more than half of Americans with no more than two insurers to choose from, and the taxpayer burden exploding," said an HHS spokeswoman.

IOWA SOUGHT WAIVER

Iowa had sought a waiver from the federal government to allow the state to move people into different pools of coverage as a way to separate costs and ideally encourage younger, healthier people to buy insurance. Iowa Gov. Kim Reynolds pulled the request last week when it became clear the federal government would not reach a decision on Iowa's waiver before Wednesday's enrollment start. The rate hikes in Iowa are considered high enough that roughly 20,000 people will drop insurance coverage.

The Midwest is expected to see 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 has proposed rate hikes of 35% to 42%. In South Dakota, the insurer Avera proposed a 20% increase for the individual plan.

TAX CREDITS AVAILABLE

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, for example.

"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," said 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 a year in wages or less. The tax credit, which is refundable, can offset up to 50% of the employees' premiums.

The tax credit can be even higher for companies with fewer than 10 employees who pay an average of $25,000 or less. More information on the tax credits can be found at https://www.healthcare.gov/…

It's an odd statement, but for a lot of farmers and small businesses, an employee and the employee's family may be financially better off going to the exchange rather than accepting insurance through an employer.

THE "FAMILY GLITCH"

If an employer offers insurance not just to the employee, but to spouses and dependents, there could be a "family glitch" hitting the worker's family. Insurance for an employee could be affordable, so the employee enrolls through work. But the insurance may be too costly for the family, so the spouse and kids go out onto the exchange to find a cheaper policy. Unfortunately, the "glitch" means the employee's family buying insurance on the health-care exchange wouldn't be eligible for the tax credit to lower their share of the 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 said. "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.

And 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. Riensche said he's looking at a premium increase of 27% for 2018 that could jump to a 45% increase in 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 healthcare system was less than perfect before Obamacare and now they have totally broken it," Riensche said. "How am I going to offer other young people a chance for a career in farming?"

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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Chris Clayton