The $12M patient who drove insurance rates higher in Iowa

Iowa's health insurance exchange faces a unique challenge — an individual who has $1 million per month in medical claims.

David Anderson, a research associate at Duke University Margolis Center and former health insurance official, discusses Iowa's exchange market in a recent post on his healthcare blog called Balloon Juice. He notes that Iowa's exchange market is facing many of the same challenges as those in other states, such as transitional, underwritten health plans covering most of the profitable individual market, but it is also experiencing the unique problem of providing insurance to an individual with $12 million in annual medical claims.

Des Moines, Iowa-based Wellmark Blue Cross and Blue Shield sent letters to its 30,000 customers last spring, telling them it was raising their premiums by about 38 to 43 percent for 2017. According to Mr. Anderson, about 10 percentage points of that increase stemmed from one patient with a severe genetic disorder who receives $1 million worth of care per month.

This extreme outlier creates a difficult situation for insurers offering plans on the exchange in Iowa, according to Mr. Anderson. "In a competitive market where the subsidies are tied to the second least expensive Silver [plan] and there is one super-outlier who cannot be reinsured against, every carrier lives in fear of being chosen by the one outlier," he wrote. "If they set their rates low enough to be attractive to healthy people, they lose money on the catastrophic expected claims. If they set the rates high enough to cover a $12 million claim, no one buys their product."

Mr. Anderson says a solution to this issue is to remove the "super-outlier" from the risk pool and use general taxes to pay for the individual's healthcare, which would lower premiums in the individual market in Iowa by $10 per member per month. 

Wellmark Blue Cross and Blue Shield announced this month it is exiting Iowa's ACA health insurance exchange for next year. Over the past three years, the payer has implemented double-digit premium hikes and still sustained $90 million in losses on its exchange plans in Iowa.  

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