Medica might bail on Iowa's individual market

Without government intervention, Minnetonka-based Medica says it might drop out of the individual market in Iowa — a threat that puts a spotlight on the Hawkeye state in debates on the future of the federal health law.

Medica's exit likely would mean zero health plan options next year in much of the state's individual market, since two other insurers announced in recent weeks that they are dropping out of Iowa in 2018.

The insurer exits apply only to the individual market, where self-employed people and those who don't get coverage through their job or the government buy health insurance. It's a relatively small slice of the overall health insurance market that's undergoing fundamental change with the federal Affordable Care Act (ACA).

"Iowa appears to be the first place where there may be no offers anywhere, or in most of the state," wrote Gary Claxton, a vice president with the Kaiser Family Foundation, in an e-mail.

In a statement Wednesday, Medica said it wants actions at the federal or state level to stabilize the market in Iowa, where regulators say a number of insurers have lost money.

Medica suggested that a high-risk pool could be created to cover known individuals with high-cost conditions, pulling them out of the individual market risk pool. Alternately, the state or federal government could create a "reinsurance" program that would help cover health plan costs for patients with unusually high medical bills.

In its statement, the insurer also asked for government officials to "confirm the rules of the road, and that they are stable through 2018."

House Republicans this week are trying to advance legislation in Congress to repeal and replace the ACA, which creates uncertainty for the future of coverage under the law. Insurers, meanwhile, have been pressing for assurance that the federal government will keep funding cost-sharing reduction subsidies that help many lower-income people with out-of-pocket costs in ACA coverage.

In Minnesota, lawmakers have agreed to put more than $500 million toward a reinsurance program over the next two years. "The two carriers with the most experience in the Iowa market have pulled out," Bartsh said. "It is incumbent upon Medica to proceed with caution."

Iowa is emerging as a prime example for the precarious fate of insurance markets under the ACA. Minnetonka-based UnitedHealthcare competed in the state in 2016, but dropped out of the ACA insurance exchange for Iowa this year as part of a broad pullback due to financial losses.

Earlier this year, insurance giant Aetna and the Blue Cross insurer in Iowa said they would drop out of the individual market for 2018. That likely leaves Medica as the only option across most of the state.

Medica currently sells coverage statewide. The only other current carrier that hasn't announced an exit in Iowa for 2018 is Wisconsin-based Gundersen Health Plan, which competes in five counties, according to Iowa insurance regulators.

Doug Ommen, the Iowa insurance commissioner, said Wednesday in a statement: "Although individual state markets vary, I am in Washington along with other state insurance commissioners asking for action. Long-term, the individual health insurance market under the ACA was and still is unaffordable and unsustainable."

While there have been signs that markets under the ACA have started to stabilize, that's not true everywhere, said Claxton, the Kaiser foundation executive. The structure of the health law depends on private insurers competing, because the ACA doesn't create an alternate mechanism for delivering tax credits — the subsidies come when people buy individual market policies.

"There are no alternatives if insurers in an area do not want to sell coverage there," Claxton wrote in an e-mail.

The health law provides subsidies that promised to expand enrollment in the market, but the ACA also has brought financial losses due to a lack of young and healthy subscribers. The law also prohibited preexisting condition exclusions that insurers previously used to control costs in the individual market. But the exclusions were widely unpopular with consumers.

Medica posted its biggest financial losses ever in 2016 due in part to the individual market troubles, although the bigger driver was red ink from a Minnesota contract in public health insurance programs.

Christopher Snowbeck • 612-673-4744