Wellmark Blue Cross and Blue Shield's retreat from Iowa's individual insurance marketplace shows why health insurers need to know if the Trump administration intends to support the exchanges or watch them explode.
Iowa's dominant health insurer said Monday it will stop offering individual coverage both on and off the Affordable Care Act's insurance exchanges in 2018. The exit will affect about 21,400 people—a little more than 1% of Wellmark's membership in Iowa.
For months, insurers have threatened to quit offering marketplace plans if they don't get the regulatory details they need to design and price their insurance plans.
Wellmark is a latecomer to the health insurance exchanges. It began offering marketplace coverage in Iowa this year. Before that, it sold individual insurance plans outside of the ACA marketplace. In a statement, Wellmark said it lost about $90 million from ACA-compliant health plans sold in Iowa over the past three years.
That's not a small sum, and insurers aren't in the business of withstanding losses to prop up a struggling market, said Craig Garthwaite, a health economist at Northwestern University. It's critical that the insurers are able to at least break even on the marketplaces, he said.
Still, the loss is a drop in a bucket relative to the $2.7 billion in revenue Wellmark recorded in 2016 alone, show.
Given the minor loss, it is likely that Wellmark's exit has more to do with the uncertainty surrounding the future of the health insurance landscape and the prospect of further financial losses if the Trump administration fails to shore up the marketplaces, experts said.
Wellmark CEO John Forsyth's comments show as much. This week he joined the chorus of large insurers that have warned Congressional leaders they can't commit to selling exchange plans in 2018 without an inkling of the insurance regulations to come. National insurers Aetna, Anthem and Cigna Corp. have yet to throw their hats in the ring for 2018.
While there are possible fixes that could stabilize the individual market, “the timing and relative impact of those solutions is currently unclear, Forsyth said in the statement. “This makes it difficult to establish plans for 2018.”
“I don't know why any insurance company would want to participate in the individual market given the policy uncertainty that's flowing around it,” said Sabrina Corlette, a health insurance expert at Georgetown University. “The risks are so high.”
Wellmark's exit leaves just two other health insurers—Aetna and Medica—selling plans on Iowa's insurance exchange next year. Neither have decided if they will continue to sell exchange coverage. Medica said it “needs to carefully consider its options” in light of Wellmark's announcement. Aetna declined to comment, but its CEO Mark Bertolini said earlier this year that it couldn't decide whether to participate in the exchanges “given the unclear nature of where regulation is headed.”
The federal government continues to send insurers mixed signals. In February, the administration proposed a rule to stabilize the insurance market while Congressional Republicans worked to overhaul the Affordable Care Act. The CMS sent the rule for final review on Monday.
It would give health insurers more flexibility to design plans and limit individuals' ability to enroll outside the ACA's annual open enrollment period. But the rule failed to address insurers' most pressing concerns about the availability of cost-sharing reductions and the enforcement of the mandate that consumers purchase coverage. Those two policies are essential to ensure the individual market stays afloat and affordable during the transition period to an ACA replacement plan.
Insurers also need to know that the Trump administration will be an active partner in encouraging consumers to sign up for marketplace coverage, Garthwaite said. The marketplaces have struggled to attract enough young, healthy people to balance out premiums.
But the Trump administration undermined the insurance marketplaces when it pulled advertisements meant to encourage people to sign up for coverage in the final week of open enrollment that ended Jan. 31. The move, which was labeled “sabotage” by Democratic lawmakers, is now being investigated by the HHS inspector general's office.
Yanking the ads is one reason exchange enrollment dropped to 12.2 million this year.
The clock is ticking. Health insurers in most states have until June 21 to decide whether to offer coverage on the ACA's exchanges in 2018. It is unclear if they will get the details they need to determine 2018 premiums in time. House Republicans' ACA repeal-and-replace bill failed last month after facing opposition from conservative and moderate members. They have not yet found a political path forward.
In the meantime, the health insurance marketplaces have yet to unravel. But the Trump administration has the power to see that they do. Insurers won't stick around to experience the aftermath.