Rate filing season is in full swing. Medica was Iowa’s only ACA insurer for 2018. They asked for a mega rate increase to cover the state and received it. Now they are asking for a much smaller rate increase for 2019.
Last year, Medica said it needed a 57% premium increase – the largest in Iowa history – to remain as the state's sole individual health-insurance carrier. This year, the company is proposing an increase less than one-tenth as big. https://t.co/Q6vcmQH47F
— Tony Leys (@tonyleys) June 20, 2018
What’s going on?
Medica probably overpriced in 2018 is the short story.
Let’s assume that 2018 was appropriately priced. If that is the case, then the following things should be taken into consideration for 2019 rate building.
+5 to +10 points for general medical trend inflation
-2 to -3 points for repeal of the Health Insurance Tax (HIT) for 2019
+10 for repeal of the individual mandate
+ ??? for the proliferation of Farm Bureau and other underwritten plans that should be able to pull good risk out of the ACA pool.
Under that accounting, we’re looking a plausible baseline rate increase of at least twelve points to
twenty or more points. And Medica came in at basically medical trend rates. They overpriced in 2018 because they were a one year monopoly. They overshot their rates and should be very profitable for 2018.
Iowa is seeing the proliferation of Farm Bureau underwritten plans and Wellmark is re-entering the market. Wellmark will have a serious data advantage over Medica. I am still surprised that Medica is planning to stay in Iowa as Wellmark’s ability to legally underwrite via the Farm Bureau makes projecting the remaining guaranteed issue risk pool a high variance exercise:
Wellmark will be effectively granted a de facto monopoly on non-group insurance sales in Iowa. There is currently a single insurer, Medica, offering ACA plans. Wellmark has signalled that it wants to re-enter the ACA market in the state for 2019. Wellmark will be able to strategically offer ACA compliant products that can stick Medica with very high cost individuals without sufficiently high risk adjustment payments to make them whole. At the same time, Wellmark can pick up all of the limited remaining good risk into the underwritten not quite insurance plans while choosing how much and at what price point they want to take on of the remaining highly morbid guaranteed issued pool. Medica has no ability to defend itself or project its exposure. I will be shocked if Medica is still selling policies in Iowa next January.