Tony Leys

tleys@dmreg.com

Iowa’s dominant health insurance company has decided to quit selling individual policies because of tumult in the market stemming from the Affordable Care Act and Republicans’ failed effort to replace it.

Wellmark Blue Cross & Blue Shield’s decision means more than 21,000 Iowans who bought health insurance policies from the company in the past three years will need to find another carrier — and it’s not clear all of those people will have another choice.

Wellmark President John Forsyth said his company's decision was painful but necessary, because the carrier had lost $90 million over three years covering that group of people.

“We’re an Iowa company, we’re here for Iowans, we want to do the right thing for Iowans, but we can’t allow a small subset to put the broader group in jeopardy,” he said in an interview Monday.

Forsyth said the overall problem is too few healthy, young consumers are buying health insurance. That drives up costs, because the pool of customers is filled with older Iowans with chronic, expensive health problems. “You’ve got to get those healthy people in the pool to make this work,” he said.

Monday's announcement won’t affect most of the 1.6 million Iowans who have Wellmark insurance, including policies purchased through an employer. It also won’t affect nearly 77,000 Wellmark customers who bought individual policies that took effect before Jan. 1, 2014. But it will mean the company won’t sell any new individual policies for 2018, and those who bought such policies since 2014 will lose them.

Two other carriers, Aetna and Medica, sell individual policies in much of the state. But they have not yet committed to doing so for 2018. Iowa Insurance Commissioner Doug Ommen said he is worried that consumers in some Iowa counties won’t have any options if they need to buy individual health insurance policies for next year. “We are very concerned about this development,” Ommen said of Wellmark’s announcement.

Ommen said carriers have until June to submit proposed health insurance premium rates for 2018, and they still would have until October to decide whether to pull out of the state's market.

Ommen said he hopes Congress gives states more flexibility to set up rules that fit their markets. When asked what advice he would give to Wellmark customers who could lose their 2018 coverage, Ommen said he was unsure what to say beyond telling them to consult with their insurance agents. “Frankly, at this point, it’s a difficult circumstance,” he said.

The Affordable Care Act, also known as Obamacare, ordered insurers to stop denying coverage to people with pre-existing health problems. That step forced insurers to take on more people needing expensive care. In return, the 2010 law required most Americans to have coverage or pay a penalty. However, Forsyth said the penalty hasn’t been enough to goad many young consumers into the pool, and the law includes numerous exemptions that people who lack insurance can use to buy coverage after they become sick. “If you’re trying to beat the system, there are ways to drive a truck through the existing system,” he said.

Now, President Donald Trump's administration has decided not to enforce the Obamacare penalty for Americans who fail to obtain health insurance. That makes the situation even worse, Forsyth said.

Forsyth emphasized that Wellmark’s decision to pull out of Iowa’s individual market is not a political statement about the partisan war over health care. “We’re kind of agnostic about that,” he said.

He noted that Wellmark stopped selling individual health insurance policies in South Dakota last year, when President Barack Obama was still in office. He said his company probably would have decided to pull out of Iowa’s individual market for 2018 even if Republicans in Congress had passed a bill it considered last month. That bill, the American Health Care Act, was withdrawn. It would have canceled the Obamacare requirement that most Americans have insurance. Instead, it would have placed a 30 percent surcharge on premiums for anyone who failed to have continuous coverage but wanted to buy it in the middle of a year.

Forsyth said the 30 percent surcharge would have been too small to encourage young Americans to purchase coverage before they became sick. Instead, young adults could have figured they’d go without insurance and then pay the higher premiums in the unlikely event that they developed a catastrophic health problem, he said.

Wellmark dominates Iowa’s health insurance market, selling roughly three-quarters of all policies in the state. Janis Van Ahn, a Johnston health insurance agent, said she had feared Wellmark would pull out of the individual-policy part of the market. “I’m not surprised by it. But did my heart just sink? Yes,” she said after learning Monday afternoon about the development.

In much of Iowa, the only other two choices for individual health insurance are Medica, a relatively small carrier based in Minnesota, and Aetna, a national company that already has stopped selling such policies in all states but Iowa, Delaware, Nebraska and Virginia. There’s no guarantee that either of those companies will continue selling policies to Iowans who need individual coverage, Van Ahn said. “What are these people going to do?”

Medica spokesman Greg Bury said Monday that his company hasn’t decided what to do. “In light of information about insurers pulling their products from the individual market in Iowa, Medica needs to carefully consider its options,” he wrote in an email to the Register. Aetna’s press office did not respond to a request for comment.

Cynthia Cox, a national health-care analyst, said such situations are cropping up around the country. Cox, who is an associate director of the Kaiser Family Foundation, noted that the national carrier Humana announced last month that it would stop selling individual policies. Other carriers could follow, she said.

Cox said the carriers already were struggling to accurately set premium rates before Congress waded in last month and considered a bill to repeal and replace Obamacare. U.S. House leaders pulled that bill because of lack of support, but they’re still talking about making major changes to the health-care system. If carriers want to sell individual insurance for 2018, they have to submit proposed rates by June. But they don’t yet know what the rules will be, Cox said. “That uncertainty makes insurers very nervous,” she said.

Plus, Trump has said he wants to let Obamacare “explode,” making insurers doubt his administration would help solve problems as they crop up, Cox said.

The individual Wellmark policies that would be affected by Monday’s decision include 18,900 sold in traditional ways and about 2,500 sold on the Obamacare “exchange,” which is the government’s online marketplace. The exchange plans qualify for federal subsidies that help moderate-income Americans pay their premiums. Wellmark was a late entrant to that system, only beginning to sell such plans for 2017.

For the current year, Wellmark raised premiums on some individual health-insurance customers by as much as 43 percent.

Wellmark's decision to stop selling individual policies in Iowa comes after consumers here already lost two other choices for such plans. UnitedHealthcare announced in 2016 that it would stop selling individual policies in the state. CoOportunity Health, a health-insurance co-op set up under the Affordable Care Act, collapsed in 2015.

Forsyth said his company hopes to re-enter the individual market in the future, but it has firmly decided to stay out for 2018. He made several recommendations for how government leaders could stabilize the market. One would be to set up a system to help shoulder insurers’ costs once they top $100,000 in a year for a particularly sick consumer. That would only affect a few hundred Iowans per year, but it would do a great deal to stabilize insurers’ risks, he said. Forsyth cited a single Wellmark customer who has a rare genetic disease that is costing more than $1 million per month to treat.

Forsyth said he supports the Obamacare rule barring discrimination against people with pre-existing health problems. But he said the government needs to set up strong measures to encourage young, healthy people to buy coverage in order to balance out the costs of older people with more health problems.

Wellmark also wants the government to give young people extra subsidies toward premiums. And he wants the government to let insurers return to their old practice of charging young people as little as one-fifth as much for premiums as older people are charged. The current rule is one-third, meaning insurers have to charge relatively high rates to young consumers, discouraging them from getting in the pool, he said.

Critics of the idea of loosening the rule say doing so would let insurers charge older consumers exorbitant premiums, but Forsyth said that wouldn’t have to happen if enough young people enter the pool.

Gov. Terry Branstad, a Republican, placed blame for Monday's news squarely on the Affordable Care Act. "Gov. Branstad and Lt. Gov. (Kim) Reynolds continue to believe that Obamacare is unaffordable, unworkable and unsustainable. That's evident in today's announcement from Wellmark," spokesman Ben Hammes said in an email to The Register. "We look forward to continuing to work with the Congress and Trump administration to replace it with a plan that works to make health care more affordable, empowers individuals to have high quality health care, and provides states like Iowa the flexibility we need to afford and sustain our Medicaid program."