Wellmark and Iowa’s market questions

Wellmark is Iowa’s largest insurer.  They control the vast majority of the underwritten individual market in Iowa as well as a significant chunk of the employer sponsored insurance market. They left the Iowa ACA market in 2018 after they lost a boat load of money in 2016 and 2017.  They also were a major intellectual push behind the withdrawn Iowa Stopgap Measure. 

And evidently, Wellmark is thinking about getting back into the ACA market in Iowa for 2019.

A little more than a month after the Des Moines-based insurer left the state’s insurance exchange, Wellmark will return in 2019 to sell Affordable Care Act-compliant plans on and off the exchange, the company announced Thursday.

“We are predisposed to want to be in this market, so we need just enough certainty to allow us to be there and we think we now have that,” Cory Harris, executive vice president and chief administrative and legal officer, told The Gazette Thursday.

I have a lot of questions.

The first is mechanical.

How is Wellmark getting around the five year lock-out period?

Looking at the RWJF HIX Compare data for 2018, I am not seeing any off-Exchange only plans offered by Wellmark in Iowa.  Many insurers that wanted to dodge risk over the past few years would pull everything out of a state except perhaps a single off-Exchange Bronze plan in a rural county.  The intent was not to actually sell that plan, it was to comply with the letter of the law and avoid a five year lock-out.  So what is their plan?

Secondly, if Wellmark re-enters the market, does Medica leave the market? There are two major concerns if I was a Medica executive.

Right now, Medica is the sole insurer for the entire state of Iowa’s ACA markets, both on and off-Exchange.  Medica faces actuarial risk.  They only need to worry about whether or not their actuaries projected reality either correctly or under-estimated risk.  If the actuaries over-estimated risk in building premiums, Medica will have a profitable year.  Medica does not need to worry about risk adjustment or strategic decisions of competitors.

Wellmark has expertise in selling to good risk.  They control most of the underwritten grandfathered and grandmothered plans in Iowa.  We are expecting to see short term plan rules that allow for more underwriting to be published soon.  Wellmark could conceivably cherry pick the good risk from Medica with underwritten plans.  Plausibly good risk could be identified by mining Wellmark’s claims databsae for individuals who previously bought from Wellmark Exchange or Employer markets and had low claims and good demographics.  This possibility would lead to Medica raising their rates to account for a sicker risk pool which drives some of the marginal risk away.

The second issue on re-entry and Medica’s decision making is whether or not Wellmark will re-enter all counties with broad networks?  We know that there are people with persistent high cost claims.  Medica currently is able to spread their cost across the entire risk pool and they don’t worry about a beggar thy neighbor scenario.  Wellmark could elect tore-enter Iowa in all counties but offer hyper narrow low cost networks in a few counties that coincidentally don’t have high end facilities.  Medica would still be covering the high cost patients and receiving insufficient risk-adjustment and reinsurance payments to cover the cost of care.

The solution to this strategic sub-question is for Iowa to submit an Alaska style condition based 1332 waiver for reinsurance.  That would remove some of the incentives to game the system and spread the entire cost of recurring catastrophic care to a broader population.

Those are the two major questions that I have.