Iowa has 99 problems and Silver is one

Paul Demko at Politico had a great long read on the challenges of the Iowa individual market earlier this week.

critical choices by state regulators, insurers and other key players also contributed to the tumultuous climate. For many Iowans—as many as 72,000 could be affected by Medica’s rate increase—it means terrible options for obtaining medical care.

Medica is the only insurer on the ACA Exchange in Iowa. Their plan offerings seem designed to only attract sick people and shed healthy people due to the non-payment of premiums over the course of the year.  That is odd.

In all 99 counties, they offer only a single Silver plan. That Silver plan is the benchmark plan. The benchmark plan sets the size of subsidy. Anyone who buys a plan that is less expensive than the Benchmark pockets the difference. And if they buy a plan that is more expensive than the Benchmark, they pay the extra cost.

When there is a single Silver plan there are no great deals for healthy people. CSR eligible buyers who make just under 200% Federal Poverty Line ($23,500 for my example in zip code 50047) are expected to pay $120 for the Benchmark plan. This buys them an 87% Actuarial Value plan with a $500 deductible and a total out of pocket exposure of $2,000. For someone who knows that they are likely to use a lot of services this is a good deal. For someone who thinks that they are pretty healthy, 6.3% of their income is a lot to ask. Their worse case cost is about two months worth of income if they were to be hit by a meteor.

Medica offers several Bronze plans that after subsidy for this case, out of pocket premiums are less than a good six pack of beer per month. However those plans all have massive deductibles and out of pocket expenses. The least expensive Bronze plan has a $6,000 deductible and a $6,650 out of pocket max. If the person is hit by a bus, they are paying three months worth of wages to satisfy the deductible. That is not adequate insurance. Some healthy people with assets or the hope of assets might decide that paying the equivalent of two cups of 7-11 coffee per month for a Bronze plan that they have no intention of using is worth it. Others will just not be covered.

Medica could have played gap games to attract a healthier and larger risk pool. Their Silver plan is an approximately 68% Silver plan. HHS rules allows Silver plans to range from 66% AV to 72% AV. Medica could have created a very low AV Silver and a high AV Silver. The high AV silver would be the benchmark. Almost all of the CSR eligible enrollment would have gone to the low AV Silver as CSR equalizes the benefit for high and low AV Silvers. The high AV Silver is a manipulation more than a sales target. The higher benchmark makes the low cost Bronze plans even lower cost for more people higher up the income scale. It makes the Gold plan comparatively lower cost as well as the difference between Gold and high AV Silver is less than the current spread.  Lower premium plans mean fewer healthy people decide to not pay their premiums in the middle of the year.

This makes no sense to me.  Medica is giving away money and attracting only bad risk.  The Million Dollar Man will stay with Medica, the 23 year old young invincible won’t.

Medica, as the sole insurer, should be offering a dominated high cost Silver plan. It improves their risk pool, it minimizes attrition of healthy people who don’t want to pay premiums in the middle of the year and it builds their data sets for risk adjustment in future years when there are new entries into the Iowa market.

This makes no sense for the state of Iowa.  Iowa wants a different system.  They submitted a hyper-aggressive 1332 waiver and withdrew it because CMS scored the budget neutrality requirements tightly which meant Iowa would get less money than they thought.  A higher benchmark Silver plan that no one actually buys helps Iowa meet their budget neutrality requirements as enrollment is higher and the baseline federal costs are higher.   Iowa’s regulators should have strongly encouraged Medica to offer a second, much more expensive Silver plan. It would have made their long term lives easier.

So yes, Iowa has some structural problems that most rural states have.  Iowa has risk pool problems that come from allowing most of the healthy risk to stay out of the ACA individual market risk pools.  Iowa is also seeing local decision-makers make strategic decisions that go against their own interests.