Insurers are planning or considering fleeing the Obamacare exchange in Iowa, a move that is driven by an overly sick, costly risk pool that includes a patient whose medical bills total $1 million a month.
The patient, a teenage boy, faces a devastating illness that likely requires weekly or daily infusions. Known as hemophilia, the life-threatening disorder prevents blood from clotting, which can lead to internal bleeding, joint damage or infections.
The state’s case illustrates some of the underlying troubles Obamacare’s individual insurance exchange has had in finding enough young, healthy people to enroll in plans so that more costly patients with complicated medical conditions can receive adequate coverage for their care. It also reveals the difficulties that arise from guaranteeing coverage for pre-existing illnesses while trying to ensure affordable plans for other customers, even as medical costs escalate.
The National Hemophilia Foundation has stressed in its advocacy work that Obamacare protections for such cases must stay in place, including that insurers continue to be obligated to cover people with pre-existing illnesses. Before the passage of Obamacare, hemophilia often was cited by advocates as an example for the need to implement annual and lifetime limits on health insurance, notes Amy Lischko, associate professor of public health and community medicine at Tufts University.
“Those are costs that patients can expect year and a year out,” she said. Before Obamacare, families with similar cases often would go bankrupt; depending on the state, the costs may have been shifted to Medicaid or Medicare. Information has not been provided about how the boy in Iowa was covered before the healthcare law.
Wellmark Blue Cross Blue Shield, which plans to exit the Iowa exchange for 2018, cited the example of the patient during a recent presentation in Des Moines to demonstrate an example of rising medical costs. The company, which has lost $90 million through the exchange, raised premiums by between 38 percent and 43 percent for this year, though most customers also received tax subsidies from the federal government that cushioned the costs. Treatment for people with hemophilia typically costs $250,000 to $1 million a year, and it’s not clear if the patient, who has not been named, has other medical conditions.
Iowa’s insurance commissioner, Doug Ommen, told the Des Moines Register that too few young, healthy people have signed up for coverage under the Obamacare exchanges, while a disproportionate number of customers with chronic illnesses have signed up. This year under Obamacare, most people who make more than $47,520 a year do not qualify for subsidies, which could dissuade some customers who turn toward other options to receive some measure of medical coverage.
“We have a concentration of people with persistent health conditions,” Ommen said. “It’s not just one person.”
The state’s exchange has roughly 51,000 customers, and an individual insurer has even fewer people paying into plans to offset costs. An analysis by the Kaiser Family Foundation from 2015 projected that 247,000 people could have been eligible to enroll in exchange plans, meaning that 80 percent of those who could have done so bought off the exchange, kept a grandmothered plan, went uninsured or bought less-robust coverage. Others may have changed employment status or gone on Medicaid.
“There’s a small risk pool in Iowa and it’s extraordinarily hard for insurers to make money,” said David Anderson, research associate at the Health Policy Evidence Hub at Duke University’s Margolis Center for Health Studies. “It’s a nasty market design problem.”
Anderson notes that to cover the patient, an insurer will need to raise its premium rates significantly, but an increase in prices could drive other patients away.
Lischko said the protections under Obamacare have helped patients with devastating, expensive medical conditions, but notes that without other interventions, the marketplace will face difficulties.
“This is good for kids and for their parents,” she said. “But it’s not good for the insurance market. They have no way of limiting those costs. They absorb them and get passed onto other premium holders.”
The state and federal governments have some options for stabilizing the exchange for next year, such as reinsurance or the introduction of a more expansive high-risk pool. Medica, one of the insurers that has not decided whether it will participate in the state, has issued such proposals to the state and federal governments.
“The two carriers with the most experience in the Iowa market have pulled out,” said Geoff Bartsh, Medica vice president for individual and family business. “It is incumbent upon Medica to proceed with caution. That means without swift action by the state or Congress to provide stability to Iowa’s individual insurance market, Medica will not be able to serve the citizens of Iowa in the manner and breadth that we do today. Our ability to stay in the Iowa insurance market in any capacity is in question at this point.”
The company will decide close to its June 19 filing deadline in the state whether it will participate in the exchange next year. Aetna has announced its plans to withdraw, leaving Gundersen Health Plans, which hasn’t announced its intensions.
Adding to the complications are uncertainties over the future of Obamacare. Republicans on Capitol Hill are working on ways to undo the law, and insurers have asked for clarity on whether they can expect to receive billions of dollars in federal payments as well as a guarantee that the administration will enforce the individual mandate that obligates people to purchase health insurance or pay a penalty. Without these, they will struggle to find the right price for premiums. The House bill that repeals and replaces Obamacare, called the American Health Care Act, allows some states to create high-risk pools for such costly cases, but critics and a Congressional Budget Office report say that the federal funding would be inadequate to guarantee affordable coverage.
“Now that we see these examples happening, the question is how to deal with them,” Lischko said of the case in Iowa. “It doesn’t mean you take away annual or lifetime limits, but you have to find a way to deal with costs.”
Lischko, who was director of healthcare policy under Massachusetts Gov. Mitt Romney, notes that Massachusetts merged its exchange market with its small group market to widen its risk pool.
“There are ways to keep a risk pool healthier so insurers stay in the game, but that’s if you want to fix it,” she said.
