New details on Wellmark's plans to sell policies through Iowa's public exchange

The 800-pound gorilla of Iowa's health insurance market, Wellmark Blue Cross/Blue Shield, released new details today about its plans to sell policies for 2017 on the health insurance exchange created as part of the 2010 Affordable Care Act. More than half of Iowans are insured by Wellmark, mostly through employer-provided policies. The company controls about three-quarters of the state's market for individual health insurance, but up to now, those policy-holders have not been eligible for federal subsidies. Wellmark announced last October that it would participate in Iowa's exchange for 2017 and confirmed those plans last month, when UnitedHealthcare disclosed that it would exit "Obamacare marketplaces" across the country, including Iowa's.

Wellmark's Chairman and CEO John Forsyth said last year that the company decided to join the public exchange so members "can access subsidies that are critical to help reduce the cost of health insurance premiums for themselves and their families." Many thousands of people will need those subsidies, because today Wellmark revealed that roughly 30,000 Iowans who hold individual policies compliant with the Affordable Care Act will likely see massive premiums increases of 38 to 43 percent next year.

Unfortunately, as Tony Leys reported for the Des Moines Register, Wellmark policies will be available on the public exchange only for residents of 47 Iowa counties--not statewide.

Wellmark executives have long claimed that the company avoided the Obamacare marketplace because its leaders anticipated problems during its rollout and were waiting to see whether the U.S. Supreme Court would uphold the federal subsidies challenged in the King v. Burwell case. I'm among those who believe the company stayed on the sidelines in the hope that sickest (and therefore most expensive) members of Iowa's uninsured population would sign on with other carriers during the first few years after the Affordable Care Act was fully implemented.

Some state insurance commissioners were able to force carriers controlling a certain percentage of the market to sell policies on the public exchange. Iowa Insurance Commissioner Nick Gerhart lacked that authority, because Iowa House Republicans and Governor Terry Branstad refused to created a fully state-based exchange. Instead, Iowa established a "partnership exchange" blending federal and state elements. So Wellmark was able to avoid selling policies through the exchange for 2014, 2015, and 2016.

However, the company did sell some 30,000 individual or family policies to new customers. Those plans had to comply with Affordable Care Act regulations on coverage, and they have turned out to be expensive for Wellmark, prompting today's news that the company will seek eye-popping 38 percent to 43 percent premium increases. Leys reported,

Wellmark Executive Vice President Laura Jackson said poor health and rising medical costs forced the company to seek state permission to raise premiums so aggressively on the plans in question. She said the company spent $1.27 on health care last year for every dollar in premiums it took in for those customers. The company says it lost $99 million on those customers in the past two years.

She said about 10 percentage points of the increase stem from the costs of a single, extremely complicated patient who is receiving $1 million per month worth of care for a severe genetic disorder.

Jackson noted many insurers nationally are planning large premium increases, for similar reasons. About two-thirds of the costs are for treatment of chronic diseases, many of which are preventable, she said. Many of the problems are related to factors such as smoking, unhealthful eating and lack of exercise. “It’s a whole lot of lifestyle, with a little bit of genetics thrown in,” she said.

It's not surprising newer policy-holders tend to be more expensive to cover than Wellmark customers who bought policies before the federal health care reform law went into effect. Many people with pre-existing conditions were uninsurable before the Affordable Care Act banned insurance companies from denying coverage for that reason. This infographic, which Wellmark released today, shows that customers who hold ACA-compliant policies tend to need more care and more expensive medications for "chronic and complex medical conditions."

Wellmark infographic 2017 premium hikes photo Wellmark2017_InfoGraphic_IA_zpsryyy6fan.jpg

In theory, Insurance Commissioner Gerhart can reject Wellmark's planned premium hikes for 2017. In practice, the commissioner approves almost all insurance company requests to raise rates.

Possibly softening the blow, Wellmark's entry on the public exchange will allow many of those 30,000 affected policy-holders to obtain federal subsidies, Kaiser Family Foundation vice president Gary Claxton told Leys today: "Claxton said even with the premium increase, some of the customers might wind up spending less on health insurance next year because of the change."

The bad news: only Iowans in 47 counties will be able to purchase Wellmark policies through the exchange. Leys covered that news in a separate article for the Register today.

The new policies will be HMO plans that Wellmark will co-own with the Des Moines-based Mercy system and with the University of Iowa Health Alliance, which includes the Genesis system in the Quad Cities, Mercy Medical Center in Cedar Rapids and the Great River system in Burlington.

The new plans will be offered to people buying individual plans on or off the Obamacare marketplace and to small businesses. Organizers expect demand to build over several years, as the plans show results in holding down costs and providing good care. [...]

The new plans will pay for some specialized care outside of the network, such as transplants or treatments of rare diseases not available at Mercy or the UI. Emergency care also will be covered at outside hospitals. But most care will only be covered if it's provided within one of the two networks.

Wellmark said the new plans will be up to 15 percent less expensive than its traditional open-network policies. They hope to expand the new plans to more counties as other clinics and hospitals agree to join. They also expect some large employers to show interest in offering the plans as options to their workers.

Click through to view a map showing where Iowans will be able to purchase Wellmark policies through the exchange. Seven of the ten largest-population counties are among those where Wellmark will offer HMO plans next year. More than half of Iowans live in those 47 counties. On the other hand, the 52 counties where Wellmark policies will be unavailable through the public exchange include some with large metro areas (Dubuque, Story, and Pottawattamie) and medium-size cities (Marshall, Wapello, Muscatine, Lee). Iowans living in those 52 counties who happen to hold one of Wellmark's ACA-compliant policies will either have to pay the full premium increase or hope they can find another carrier selling more affordable health insurance through the exchange.

Top image taken from a Wellmark infographic released on May 12 to explain large premium increases for policy-holders whose insurance complies with the Affordable Care Act

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