FRANKLIN, Tenn. — When Phil Yates walked into a tiny strip mall storefront last month, he was hopeful he might walk out with an affordable health insurance plan.
Here in the Volunteer State, the 61-year-old retiree had a decent shot: Another 61-year-old retiree could have walked into that same office and enrolled in a relatively basic plan for as little as $283 per month, far less than the $860 a month Yates paid this year for an Obamacare plan.
But Yates has diabetes — and while that wouldn’t matter to other insurers, it matters a lot to the local company he had pinned his hopes on: Tennessee Farm Bureau Health Plans. Farm Bureau, as it’s known colloquially, is still using customers’ health status to determine their rates and eligibility — so Yates’s diabetes is enough to exclude him from coverage. In fact, excluding consumers like Yates is one of the main reasons Farm Bureau’s prices are so low — the company can keep costs down by mainly covering people who are healthy.
For every other insurer in the country, this kind of discrimination was made illegal by the Affordable Care Act. But because of a decades-old state law, Farm Bureau’s health plans don’t have to play by Obamacare’s rules.
For many Republicans in Washington, plans like the Farm Bureau’s, with fewer regulatory burdens and lower prices, are the answer to all of the ACA’s ills. They could also be the future, in their view, for the rest of the country.
An executive order President Trump signed last month — the most significant action he has taken on health care reform since his election — directs several agencies to find ways to encourage similar kinds of plans, including short-term policies that can deny people with preexisting conditions and association health plans that will be subject to far less regulatory oversight.
Democrats vilify these kinds of plans and some of the practices Farm Bureau engages in. They say people like Yates should have the same access as everyone else. And they think separating healthy and sick people into different groups, with different rules, will make prices higher and care worse for sicker Americans like him.
But as interviews with insurers, brokers, consumers, regulators, and lawmakers across the state of Tennessee show, Farm Bureau might not fit neatly into a box: It isn’t nearly the villain that ACA supporters paint it out to be; but it also isn’t the cure-all Republicans have promised.
Farm Bureau is popular in the state, both with consumers and regulators, precisely because it isn’t taking advantage of its regulatory freedom to engage in some of the practices Republicans have championed.
It isn’t clear whether other insurers will be able to replicate what it’s done. And of course, even if they could, it won’t do much to help consumers like Yates.
He’s shelled out more than $12,000 this year toward his premiums and his deductible alone.
“With Trump’s announcements, I thought something might change. They’ve had seven years to look into all this detail and they’ve come up with a bunch of boloney. I’m very disappointed,” Yates said. “From a practical standpoint, there’s been no help yet.”
Until recently, few of Washington’s health experts had heard of Tennessee Farm Bureau Health Plans.
And that’s how the company liked it.
Its headquarters isn’t nearly as glamorous — or ominous — as the shining, uber-secure cathedral of a complex that its biggest competitor, BlueCross BlueShield of Tennessee, enjoys on a hilltop overlooking Chattanooga. Its nondescript brown-brick headquarters sits a little outside the tiny Middle Tennessee town of Columbia, best known for an annual weeklong celebration of mules.
“You can look around and see we’re not a big, huge insurance conglomerate, or whatever, ” drawls Randy Wilmore, the unwaveringly polite Tennessean who’s been the company’s chief marketing officer for about three years, leaning back in his office chair and flashing an easy smile.
But that unassuming, easy-to-miss ethos — and the low profile Farm Bureau has labored to maintain — belies its sizeable presence in the state. Across the Farm Bureau Health Plans business, the company covered more than 16 percent of the roughly 344,000 people in Tennessee who don’t get insurance through their job or a government program in 2016 — a market share second only to the state’s BlueCross plan, which has long dominated the individual market in the state, according to figures from SNL Financial.
Some 25,400 people in Tennessee have the kind of plan Yates was trying to get — what the company calls a “traditional” health plan.
It’s an apt description — this style of insurance would be familiar to consumers who shopped for their own plans in the days before Obamacare. The company flatly excludes anyone with an especially pricey health condition, like Yates’s diabetes. Its rates are based on a person’s age, tobacco use, and other health status indicators — and sick people, when they do get coverage, pay higher rates. Maternity coverage costs extra, and doesn’t kick in right away.
The application — much longer than HealthCare.gov’s — asks about cholesterol and glucose levels, recent bouts with cancer, stroke, heart attack, epilepsy, and Alzheimer’s, among other diseases. Maximum out-of-pocket costs are higher, too.
Despite Obamacare’s strict rules against these practices, Farm Bureau can still sell those plans — because under Tennessee statute, it’s technically not considered an insurance company and thus not subject to insurance regulation or oversight.
In a testament to Farm Bureau’s clout across the state’s conservative legislature, it won the exemption from regulation back in 1993, as part of an effort to avoid the 2.5 percent tax that the rest of the health insurers in Tennessee pay on each premium they collect. The same text also shields it from other state requirements, like how much capital the company must keep in its reserve accounts.
“It’s not a loophole. It’s not an accident.”
Ryan Brown, general counsel for Tennessee Farm Bureau Health Plans
Farm Bureau still pays some state and federal taxes, including the ACA’s health insurance tax, on all of its individual plans. And because its traditional plans aren’t compliant with Obamacare, those customers do have to pay the federal tax penalty if they forego health insurance through the ACA.
“The legislature has an opportunity every year to say no, we don’t want this setup to continue, and yet every year since 1993 they’ve allowed this to continue because we’re trusted, because we’re doing what we told them we would do,” Ryan Brown, the company’s quieter general counsel, said, repeating himself for emphasis. “It’s not a loophole. It’s not an accident.”
Republicans weren’t thinking of Tennessee Farm Bureau as they labored to draft an Obamacare overhaul in the basement meeting rooms of Capitol Hill, or when they gathered in the Roosevelt Room as Trump signed his executive order. But the company nonetheless exemplifies many of their clearest talking points.
The Republican Party has spent most of this year pushing to exempt most insurers from Obamacare’s onerous regulations, designing intricate waivers under which insurance companies could, for example, deny coverage to sick Americans, or charge more depending on an individual’s health conditions — as Farm Bureau does.
To be sure, not every Republican supports a straightforward rollback of Obamacare’s protections for preexisting conditions. But many of the other policies up for debate would have had a similar effect. One would have let insurers charge older Americans like Yates many times more than younger members, rather than the 3:1 limit included in current law. Others would let companies decline to offer certain benefits, like insulin or chemotherapy treatments, effectively banning people with diabetes or cancer.
The Trump administration’s October executive order similarly looks to create a separate, less-regulated insurance market alongside the existing Obamacare markets. The details are still being fleshed out, but the order encourages the administration to develop rules to let small businesses band together in less regulated plans like Farm Bureau’s, though likely with some additional federal protections for those with preexisting conditions. The short-term plans that the executive order also encourages likely wouldn’t include those protections.
“Many Obamacare regulations will be waived for those in these [new plans], including costly mandates on what the plans must cover,” Sen. Rand Paul of Kentucky, who pushed Trump toward the executive order, wrote in an op-ed last month. “This isn’t a government mandate. It isn’t a subsidy. It isn’t a tax. Rather, it is the removal of government regulation and barriers to the best possible health care for millions of people.”
Democrats — along with many national insurance companies, actuaries, and state regulators — have a laundry list of concerns with the proposals.
Their chief critique: Anything that segments the already small group of people eligible for Obamacare — the 21 million or so Americans who don’t get their health insurance through their job or a government program — will make costs higher and coverage worse for sicker Americans who get turned away from plans like Farm Bureau’s.
Split up healthy consumers from the sick, and the healthy pay less while the sick are asked to cover one another’s massive bills. That only gets worse over time, Democrats say, as higher prices in one group leave more and more people looking for other options.
Encouraging these plans “will send costs soaring for older Americans and those with preexisting conditions, and add further chaos to the markets,” Senate Minority Leader Chuck Schumer of New York said in a statement after the executive order. “If the system deteriorates, make no mistake about it, the blame will fall squarely on the president’s back.”
Across Tennessee, at least for healthy individuals, Farm Bureau’s plans are popular — as Republicans argue they would be.
Take Jason Lindsey, who lives near the Farm Bureau headquarters and manages one branch of a small, independent pharmacy in Centerville, a 30-minute drive through the woodsy, farm-dotted state highways of central Tennessee.
If he chose to purchase coverage on HealthCare.gov this year, he would have paid at least $1,500 per month for a plan that came with a $11,300 family deductible to cover himself, his wife, and their two kids. Instead, the 37-year-old Lindsey pays just $480 per month for a traditional Farm Bureau plan.
“It was our most affordable option,” Lindsey said plainly. “We’ve got essentially a security blanket in case something bad happens. Ideally that’s what insurance should be anyway.”
(For an extra $180 a month, Lindsey also elects additional coverage through a Christian health care sharing ministry — an even less regulated plan with additional religious requirements, like a pledge that he won’t abuse alcohol. Under the Obamacare statute, members of those plans don’t pay the penalty.)
“It was our most affordable option. We’ve got essentially a security blanket in case something bad happens.”
Jason Lindsey, Tennessee resident
If Republicans are looking to Lindsey, however, Democrats have their eyes on people like Jerry Burgess.
Burgess is the relatively reserved, bespectacled former CEO of Community Health Alliance — one of the nonprofit health insurance co-ops kickstarted by Obamacare. A longtime health executive in the Knoxville area, Burgess took up the call of Obamacare’s architects and set out to compete with existing insurers in the state — and to do so without having to deliver profits to stockholders.
But Burgess ran into the exact problems Democrats have long warned about when it comes to unregulated health plans: While the healthy Lindseys of the world flock to the cheaper, skimpier Farm Bureau plans, or stuck with older policies, his and other compliant plans got stuck with the older, sicker individuals, like Yates.
“Here we are, a brand-new health care company on the exchange, following all of the requirements — essential benefits, guaranteed issue, the taxes and everything,” Burgess remembered. Farm Bureau and others offering noncompliant plans, meanwhile, “didn’t have to comply” with those regulations.
“We got the sicker folks,” he said.
It certainly wasn’t just Farm Bureau, and it wasn’t just in Tennessee — the same dynamic plagued states around the country, particularly after then-President Obama allowed some individuals to keep cheaper, paltrier insurance plans they’d bought before Obamacare.
But Tennessee’s Obamacare market is much, much sicker than in many other states. Insurers here have raised rates by anywhere from 20 percent to 60 percent each year, spikes that have put the state among the highest in the U.S. time and time again. In several parts of the state, including the Knoxville area where Burgess lives, the market conditions looked so poor that at least for a time, no insurance company was willing to sell plans.
Actuarial experts say the segmenting of the market — exacerbated by Farm Bureau — is to blame. In nearly all other states, for example, somewhere between 50 percent and 60 percent of the eligible population buys their coverage on HealthCare.gov or the state exchange. In Tennessee, that figure is a paltry 43 percent, according to a state-by-state analysis of the market by actuarial giant Milliman.
BlueCross BlueShield of Tennessee — the “800-pound gorilla of health insurance” in the state, according to one Republican state lawmaker — declined to comment on whether Farm Bureau’s presence made it harder to sell regulated health plans. But any insurer that plays by Obamacare’s rules would naturally see business weakened by a segmented market.
And the two competitors have a tumultuous history, especially lately. BlueCross BlueShield of Tennessee used to process claims and provide backend support to Farm Bureau’s plans. But in July 2015, the larger company severed that contract, abruptly ending a decades-long relationship between the state’s two home-grown insurers. (A spokesperson for the Blues plan said it hadn’t ended the contract because of competition in the individual market.)
Farm Bureau maintains that it is too small a competitor to have a major impact on the state’s individual market, covering just 25,000 Tennesseans, compared with the roughly 230,000 who buy coverage on the exchange.
“To me, if you took those 25,000 covered lives today and threw them in, I don’t think it moves the needle,” Wilmore said. “You look at the number of folks on the exchange — it’s an argument that I think doesn’t have a lot of validity. Would putting those people into that pool help? … If we went away, would it fix Tennessee’s problems? Would it fix the other 49 states?”
Farm Bureau isn’t just any unregulated insurance company. It’s an institution in Tennessee, present in every single county and practically revered for its 70-year history of neighborliness and customer service. Its friendly spokeswoman Tracy appears in all its ads, decked out in the same red blazer on local TV and in The Tennessean.
It offers a whole host of other insurance products, like auto and life coverage, that are subject to regular insurance rules. And the entity that offers less regulated health plans — technically known as TRH, a division of the Farm Bureau Health Plans business within the broader Farm Bureau — has been a much more responsible company than Democrats and other critics fear it could be. But it’s also a much harder model to copy than Republicans realize.
Farm Bureau, for example, doesn’t kick any of its members out once they get sick. They can always renew their coverage, even if they develop a costly condition.
The bureau also does not have a blanket exclusion for all consumers with preexisting conditions. While Yates was turned away, others agree to a “preexisting condition waiting period,” meaning coverage of any care related to their specific health issue won’t kick in for six months. The idea is to make sure people don’t join the plan for one month, elect for an expensive surgery, then drop off the coverage.
The benefits themselves are pretty robust, too. The plans were actually designed with Obamacare’s “minimum essential coverage” requirements in mind — indeed, the Farm Bureau actually worked with the Obama administration to earn that designation, which would have shielded its customers from the tax penalty, but its application was ultimately denied. It offers a relatively comprehensive provider network and no annual or lifetime caps. The plans have an actuarial value of at least 60 percent, though it’s tough to compare to different ACA plans.
“The guts of these Farm Bureau plans are much more substantial than other noncompliant plans out there. A lot of these plans, like short-term or hybrid plans — they really have very significant internal limitations,” said Tatum Allsep, the founder of Nashville’s Music Health Alliance, which helps the city’s musicians find health insurance. “Farm Bureau — it’s awesome if you’re healthy.”
The company has even agreed to subject itself to the consumer complaint process overseen by the state’s Department of Commerce and Insurance — so even though it isn’t technically regulated by the state, the commissioner could oversee the resolution of any major consumer complaints.
“We’re not rogue. You can’t have this line of business that’s regulated over here and then have this other that’s off doing whatever,” Wilmore said. “If we were rogue, we wouldn’t be around. … We really pretty much mirror what a true regulated company would do.”
“If we were rogue, we wouldn’t be around. … We really pretty much mirror what a true regulated company would do.”
Randy Wilmore, Farm Bureau chief marketing officer
In more than two weeks of talking with consumer advocates, health insurance brokers, and other officials throughout the state, STAT could find no individuals who’d been kicked off a traditional plan or raised major flags about a coverage issue, once they’d made it through the underwriting. More than a dozen insurance brokers across the state said they’d recommended the plans to customers stuck with high premiums under Obamacare.
“These are the people you see at the grocery store, you see at church — wherever you see them,” Wilmore said, laughing as he recounts having to send his own pastor a letter that the clergyman, like the others with his health plan, would face higher premiums one year.
“It’s not just lip service when we say, we feel your pain. Because not only do we hear it, but we hear it from family, friends — even my pastor.”
If President Trump and Republicans in Washington make good on their threats to end the individual mandate, which penalizes people who buy these unregulated plans, Farm Bureau and plans like it could see their membership jump.
That could magnify Farm Bureau’s destabilizing effect on the rest of the state’s insurance market.
There’s also no way for Republicans to guarantee insurers will act like Farm Bureau if they roll back regulations or otherwise encourage more of these unregulated plans to form. Not every company will be a nonprofit. Not every company will so clearly delineate what its plans do and don’t cover, or take pains to meet minimum benefit standards. Not every company will have the same community-focused outlook.
“Not every association plan is the Farm Bureau,” says Tim Jost, an emeritus professor at the Washington and Lee University School of Law. “These plans have a history of fraud, insolvencies, and all kinds of bad behavior.”
Julie Mix McPeak, the state’s blunt but affable insurance commissioner, has her fair share of concerns with unregulated plans that aren’t subject to her oversight. She wouldn’t be able to track the finances, for example, of most of the less-regulated plans the Trump administration is encouraging. A new insurer that could avoid oversight, she suggested, might run into financial troubles, declare bankruptcy, and then “restart another operation down the road excluding some of the sickest consumers.”
It just so happens that Farm Bureau is different, she said.
“They are not going anywhere, they are committed to this state and they are certainly committed to the Farm Bureau members, providing all lines of business. They are a strong corporate citizen,” she told STAT. Other new insurers “might not have that same commitment to the state and to our consumers.”
Of course, even in Tennessee, Farm Bureau isn’t perfect. It is making Tennessee’s already sick insurance market even sicker.
That may not be a problem for the healthy people who manage to get covered with Farm Bureau. And it may not be a problem for the poorer people who get subsidies on HealthCare.gov, who will see their subsidies increase proportionately as prices go up.
But Farm Bureau is making health insurance more expensive for Phil Yates and others like him — the individuals who don’t qualify for subsidies but want and need comprehensive health insurance. For these consumers, there’s been no way out of the costly insurance quagmire Obamacare created for them.
“I’m in no-man’s land,” Yates lamented. “It’s been total frustration.”
Erin Mershon produced this special report as part of a yearlong reporting fellowship sponsored by the Association of Health Care Journalists and supported by The Commonwealth Fund.