Proposed health plan for SD farmers would fall outside state and federal regulations

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 operators or 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.

Many farmers and ranchers also make too much money to qualify for subsidies that make traditional insurance plans offered within the Affordable Care Act marketplace more affordable. 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. By law, the group health plans are not technically defined as insurance.

“The plan would assist in reducing the number of uninsured and support rural health care and further enhance quality of life in rural America,” said Senate Majority Leader Gary Cammack, R-Union Center, a Meade County rancher and store owner who is the lead sponsor of the bill. “We’ve got a real crisis when it comes to being able to access and afford health care insurance … this particular plan gives an option to those folks to be able to afford something that will give them some protection and protect them from catastrophic issues that happen in life.”

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 said.

“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. “We’re talking about a substantial amount of law, and this bill just throws it all way, no protections whatsoever for consumers.”

In testimony before the Senate and in press releases issued on the bill, 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. “These plans would likely attract younger, healthier individuals, segmenting the individual marketplace risk pool in South Dakota, and leaving it with older and sicker enrollees. This would result in increased prices on everyday South Dakotans like cancer survivors.”

Similar plans are already allowed in Iowa, Michigan, Kansas, Indiana and Tennessee, which has the most experience with the benefit plans and whose program is the model for the proposed South Dakota plan.

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.

Ihnen said he and his wife have four children and farm on about 2,000 acres in Spink County. Ihnen said that for 13 years he was able to buy health insurance through his employer in the agriculture industry, but lost that option when he broke away to launch his own retail and crop-consulting business.

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. “This will give the next generation confidence of staying on the farm and continuing our strong agricultural tradition.”

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.

Sen. Troy Heinert, D-Mission, is a rancher who said he initially supported the bill as a co-sponsor but changed his mind after learning that some coverage under the plan could be restricted because it would operate outside state and federal guidelines.

“I thought that sounds good; low-wage ranch hands or farm hands might qualify,” Heinert said. “[But] I can’t risk someone thinking they are going to have coverage and something happens in a farm accident or ranch accident and they don’t have the coverage.”

Heinert voted against the bill in the 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.

“Because it’s not insurance, it’s a membership service organization, we’re allowed to do some things that result in lower costs and lower premiums, and we pass that onto the members,” Brown said.

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. The plan does not have lifetime benefit limits, and does not allow for further underwriting or removal from the plan if a patient is sickened by an illness with expensive care or treatments.

He said potential customers are made fully aware of the limits on coverage and their upfront and co-pay costs.

In many cases, Brown said, lower premiums offset the higher co-pay costs incurred by customers.

Brown rejects the idea put forward by opponents of the South Dakota legislation that the Farm Bureau health plans push sicker patients into traditional insurance or that premiums for traditional insurance will rise if the new plans are offered.

“We believe that our effect is not really on the insurance marketplace, but on the uninsured population,” Brown said. “This plan is not for everyone; it’s for a niche population. 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.”