For the third year, Iowa's largest insurer is shunning the state exchange, letting for-profit competitors take on subsidized members.
Wellmark Blue Cross and Blue Shield, nonprofit mutual insurer of 1.7 million Iowans, is declining to participate in the state's public marketplace for subsidized individual plans in 2016, despite the death of would-be nonprofit rival CoOportunity Health.
"It's not a matter of if we will participate, it is really a matter of when," Wellmark VP for healthcare innovation Laura Jackson said in a conference call. Last year, executives hinted that Wellmark could join for 2016. But now, for at least another year, Jackson said the insurer wants to focus on serving its current members and sustainably covering new populations in individual non-exchange ACA-compliant plans.
Wellmark is proposing to increase premiums for its individual ACA-compliant plans by an average of 26 to 28 percent for 2016. Those rate hikes are for just 30,000 individual members, not including the 110,000 pre-ACA plan members, and less than 2 percent of the rest of the insurer's membership. Premiums for the grandfathered plans have not been proposed yet, and rates for small employer plans are set to increase by between 5 and 10 percent.
Premiums are increasing for the ACA-compliant individual plans, the insurer said, because the membership has been "using substantially more services and are receiving care for more chronic and critical diseases than we anticipated."
Wellmark had 18 percent more claims over $50,000 in the 30,000 ACA individual plan membership than expected in the first year, while prescription drug use was 33 percent higher than the baseline population and associated costs for speciality medications were 47 percent higher than baseline.
Then there were some rare but costly cases. Wellmark said it has 135 individual members who enrolled in plans, used high-cost services and then canceled those plans or were at the end of their lives and died.
"Wellmark received only approximately 10 percent in premiums to cover those members' healthcare claims," the company said in a fact sheet. "In addition, a large number of members purchased a premium-level plan in anticipation of using a large amount of services, knowing that they would later qualify for a special enrollment period that would allow them to move to a lower cost plan."
Also, Wellmark paid $27 million to a health and life insurance guaranty association to help cover provider claims from CoOportunity Health. So while former CoOportunity CEO Cliff Gold accused Wellmark of avoiding the exchange's "bad risk," the Blue Cross giant ended up sharing a portion of the new membership's costs. (Another variable is the Supreme Court ruling on federal tax credits in Healthcare.gov.)
All of which leaves Wellmark leery of diving into the exchange market, and one of just two Blue Cross Blue Shield insurer sitting out the start of the exchanges, along with BCBS of Mississippi.
In Iowa, that means that the subsidized exchange market is a challenge and opportunity for others. So far there are three other takers.
Aetna's Coventry sold public exchange plans in Iowa for the first two years, the only competitor to CoOportunity, and UnitedHealthcare is joining to sell for 2016. A third, as yet unidentified insurer, is also set to announce its participation according to Iowa's insurance commissioner.
In Iowa, the public exchange market has yet to reach anything near its full potential.
Only 20 percent of Iowans who qualified for federal premium subsidies took advantage of them, the lowest level in the country, according to data from the Kaiser Family Foundation. CoOportunity's Gold previously surmised that a sizable portion of that population were individuals like self-employed farmers who were instead choosing to remain in low-premium grandfathered plans underwritten by Wellmark.