A Minnesota health plan finds itself as potentially the sole survivor in insurance markets in Iowa and Nebraska — a precarious position that highlights the uncertain fate of the federal health law.
Following exits by competitors, Minnetonka-based Medica is the only insurer now selling statewide coverage to individuals in Iowa and Nebraska that might possibly return in 2018 to government-run exchanges.
Having a monopoly might be enviable in some businesses, but not when it comes to selling individual market coverage under the Affordable Care Act (ACA). Dwindling competition further complicates the decision facing Medica and other health plans in coming weeks about whether to stick with business on the ACA exchanges.
"Insurers don't want to be the last one in the market," said Cynthia Cox, an associate director for the California-based Kaiser Family Foundation. "It's almost like a game of hot potato — they're trying to avoid being the only health plan for high-cost enrollees."
The troubles are confined to the market where self-employed people and those who don't get coverage from an employer buy health insurance. The individual market has undergone fundamental changes with the ACA, which outlawed the prior practice of denying coverage to people with pre-existing health conditions.
The health law also created new health insurance exchanges where individuals buying coverage can tap federal tax credits — two factors that were meant to boost competition.
Medica is among the insurers that responded by expanding to Iowa and Nebraska in 2016. Other carriers like Minnetonka-based UnitedHealthcare and Kentucky-based Humana expanded, too, but are retreating after big losses.
Insurer exits are bad for consumers because choice is diminished along with a competitive check on prices. Last week, University of Minnesota researchers published a study showing that for each additional insurer competing on ACA exchanges last year, consumers saw an additional 4 percent reduction in premiums.
For Medica, the spotlight beyond Minnesota comes in the middle of a high-profile dispute in the health plan's home state. As of May, Medica dropped about 300,000 people covered via state public health insurance programs following financial losses, and has filed a lawsuit over how the state found replacement managed care organizations.
In Iowa and Nebraska, Connecticut-based Aetna announced this spring the insurer wouldn't return for 2018. The Blue Cross plan for Nebraska dropped out of the exchange market at the end of 2016 citing $140 million in losses, and Wellmark — the Blue Cross and Blue Shield insurer in Iowa — said in April it would stop competing next year.
It's possible that other carriers could enter the Iowa and Nebraska markets, but exits have been much more common across the country.
"We have community members in those states that have significant needs. There's a threat of not having any insurance coverage," John Naylor, the Medica chief executive, said in an interview. "Our team has the mentality and spirit to go in and fight that battle, to try and help the communities have a viable option."
But Naylor added: "We can't do it alone."
In Iowa, the insurer wants policymakers to shore up the market with measures like a "reinsurance" program that would help cover costs for people with expensive health conditions. Earlier this year, Minnesota agreed to create such a program.
In addition, Medica is promoting the idea of a "virtual high-risk pool" to spread the costs for a handful of patients whose care costs millions of dollars per year. When explaining the health plan's decision to drop the Iowa market, Wellmark officials mentioned the unusual case of a patient generating more than $1 million per month in claims — an enrollee subsequently described as a 17-year-old with hemophilia.
Medica officials said they could not comment on the particular case, except to say there's the potential for a few patients like that in every state.
"The question, socially, comes back to: Who actually should be helping that individual?" Naylor asked. "Is it a broader pool of people that are insured? Is it the state? Is it the federal government? ... Right now the costs are being borne by the people in the individual market, and that's what's causing part of the issue."
Without changes, it would be extremely difficult for Medica to assume the entire risk of the Iowa individual market, said Geoff Bartsh, a vice president with the insurer. The health plan is more comfortable with the Nebraska market, he said, because Medica already has a larger share of the market. Plus, there's a degree of competition, since Blue Cross of Nebraska still sells individual market coverage to people who buy outside the government-run insurance exchange.
Last week, Medica suddenly found itself needing to make yet another decision about whether to stick with its out-of-state exchange business. For 2017, the insurer expanded into the individual market in Kansas, but last week Medica's only competitor in two large Kansas counties announced it would be dropping out.
"We want to be in these markets," Naylor said. "But it's not just up to Medica. We need state legislators and regulators to come up with solutions. We need support from the federal government."
Like all health plans, Medica faces the prospect of maintaining business at a time of great uncertainty for the health law at the federal level.
Republicans in Congress are trying to repeal the ACA, but replacement plans wouldn't kick in for 2018. In the meantime, insurers worry that the federal government won't enforce the existing law's individual mandate, which requires most Americans to buy coverage. Insurers see the rule as key to driving healthy people into the market.
Health plans also are nervous because it's not clear that the federal government will continue funding a form of consumer subsidy known as "cost-sharing reductions." As other health plans leave, the remaining insurers fear their risk pool will be overwhelmed by consumers with expensive health conditions.
"If you are [the] last and only insurer in the market, then the risk pool that you inherit is going to include both good and bad risks," Jean Abraham, a health policy researcher at the U who led the recent study on premiums and competition, said via e-mail.
"However, as premiums rise, an insurer may anticipate that those individuals with the strongest demand for medical care ('bad risks') are going to be the ones who are most likely to sign up for coverage. Individuals with lower anticipated demand ('good risks') will be less willing to pay high premiums for the coverage and may choose not to enroll."