South Dakota lawmakers have passed a bill that would allow agricultural industry groups to develop their own health-benefit plans that would be outside the purview and regulation of the state Division of Insurance and which would sidestep some federal consumer protections.
The measure is being pushed by the South Dakota Farm Bureau Federation, a powerful agricultural industry group that is seeking to create a new health plan for its 13,500 members and other farmers and ranchers across the state.
Opponents of the bill—including independent insurance companies and health groups including the American Cancer Society — argue it would be “dangerous” for consumers who buy into the plan, would weaken the stability of the overall insurance marketplace in South Dakota and lead to higher premiums for people on traditional insurance plans across the state.
The measure, Senate Bill 87, was passed by the South Dakota Senate on Feb. 3 on a 19-15 vote; it passed in the House of Representatives by a 50-16 vote on Feb. 10. The bill now moves to Gov. Kristi Noem for consideration.
Backers of the measure say it would allow for creation of affordable health plans that would provide a new coverage option for those in the agriculture industry who mostly are independent contractors and do not qualify for employer-based plans. They note that an estimated 80,000 residents of South Dakota under 65 do not have any form of insurance. The new plans would cost several thousand dollars less per year in premiums than traditional insurance, supporters said.
Many farmers and ranchers also make too much money to qualify for subsidies offered within the Affordable Care Act marketplace. The bill would allow the Farm Bureau to create its proposed health plan but also opens the door to creation of similar plans by other established agricultural groups in the future.
Opponents say the plan puts individuals or families who buy in at risk of losing money or being denied coverage because they will not receive the consumer protections, guarantees of coverage, or proof of health-plan financial stability that state and federal laws require of traditional insurance plans. Fraud also becomes more likely without state oversight of the third-party contractor that will provide the benefits and run the plan, opponents argue.
“This is terribly unfair to the health insurance industry, because we have this whole stack of rules and regulations and statutes that apply to them and now we’re going to put a competitor out in the marketplace that doesn’t have to follow any of them,” said Randy Moses, a lobbyist for the Independent Insurance Agents of South Dakota.
Opponents said that without state and federal regulation, the new plans could exclude or charge higher premiums on consumers with pre-existing conditions, could drop patients who contract complex and costly illnesses, and may not cover preventive tests or some costly services such as treatment for mental health and cancer. The plans theoretically could have annual or lifetime caps on benefits, which would force major out-of-pocket costs onto customers who become afflicted with serious illnesses, said David W. Benson, lobbyist for the American Cancer Society Cancer Action Network of South Dakota.
“This could leave people with cancer and other expensive illnesses with massive medical bills or force them to forgo needed medical treatments,” Benson said.
Similar plans are already allowed in Iowa, Michigan, Kansas, Indiana and Tennessee.
During debate on the bill in the Senate Commerce and Energy Committee, farmer Nick Ihnen of Tulare, S.D., said his family has had to make difficult decisions in order to maintain health insurance.
The family then had to buy insurance from the ACA marketplace that cost about $16,000 a year, Ihnen said. The prohibitive cost led his wife, Bekah, to take a job off the farm in order to get employer-provided insurance, which he said has reduced the time he and his wife have for both farming and raising their children.
“As you can imagine, juggling a farming operation, my own retail business, four children and Bekah having an off-farm job makes it challenging to get the work done on our farming operation, to say the least, let alone to have a family life,” Ihnen said.
Ihnen said the Farm Bureau benefits plan could provide his family a way to afford health insurance and remain committed to their farm.
“Plain and simple, this option would help my family,” Ihnen said.
Sen. Wayne Steinhauer, R-Hartford, said he was paying about $18,000 a year for private health insurance before joining Medi-share, a Christian medical sharing plan that is similar to the proposed Farm Bureau health plan. Under that plan, Steinhauer said his annual premiums dropped to about $7,000 and he still feels well covered. Steinhauer voted to approve the bill in committee and the full Senate.
Ryan Brown, an administrator with the Farm Bureau Health Plan of Tennessee, said his organization has been offering health benefits since 1947 and has operated the type of plan South Dakota is considering since 1993. The plan that is the model for the South Dakota Farm Bureau plan has about 100,000 members across the state, he said.
Brown said the plan operates outside the purview of state insurance regulators in part so it can avoid coverage mandates that add administrative and benefit costs.
Brown said the Tennessee plan has coverage that compares well with health benefits provided by traditional insurers in the Affordable Care Act marketplace. He noted that the Tennessee plan covers both preventive testing and medical treatments, including mental health treatments. He said potential customers are made fully aware of the limits on coverage and their upfront and co-pay costs.
“We are covering people who otherwise would not have any form of coverage and are now able to pay their medical bills because they have this plan,” he said.