The Des Moines Register reports that Medica is planning to stay in Iowa. They are requesting a 43% rate increase for the individual market.
“When you find yourself as the only ones between people getting access to care and people not getting access to care, your view of the situation becomes very different,” Medica Vice President Geoff Bartsh said in a prepared statement. “We’ve filed with the intent to provide access to insurance for all Iowans, whether they are farmers, small business owners or other individuals who need coverage.”
The relatively small, Minnesota-based carrier told Iowa regulators Monday that in order to stay in the market, they would need to increase premiums by an average of 43.5 percent….
Monday was the deadline for carriers to file proposed rates for individual health-insurance policies in Iowa for 2018. Medica was the only carrier to file, state regulators said.
I was wrong on being wrong. Iowa is now a single carrier state. There are no risk adjustment problems. The only risk that Medica is bearing is that their actuaries are projecting the state market wrong or there is a cavalcade of clown cars crashing. It is a rational solution to a market design problem.
The single carrier can raise their rates high enough to cover this catastrophic claim while the post-subsidy price is low enough to actually attract normal risk as well. The off-exchange market can be competitive especially if the single on-Exchange carrier splits their filing IDs so they can use different actuarial assumptions for a more normal market.
I am not seeing anything saying that Medica is splitting their plan into an on-Exchange entity and an off-Exchange only entity. So the people who are not subsidized will be paying a lot more for their insurance.
They also need to change their strategy. In 2017, in all counties in Iowa, they offered two Silver plans. The two Silver plans have the same regulatory actuarial value at 70.7%. The two plans have minor differences in price. For a 40 year old in Warren County, there is a $6 spread between the least expensive and the new Benchmark Silvers offered by Medica. With the price increase, that will lead to a $9 spread. Medica should offer a low actuarial value plan at 66% or 67% AV with a higher deductible and keep one of the two current plans as the actual benchmark. This will lead to s bit less price shock for the off-Exchange buyers and a better deal for subsidized buyers.
The last thing of interest to me is that this makes the 1332 waiver that Iowa wants as a “rescue mission” even more contradictory in their assumptions.
There are four major guide posts for a 1332 waiver. The waiver must provide at coverage at least as comprehensive as the baseline ACA, with cost sharing protections at least as good as the ACA to at least the same number of people at no more net federal costs than the ACA.
Iowa’s argument is one of choosing a favorable counterfactual. Their counterfactual will be that their plan will meet the coverage requirements of at least as good for as many people as the ACA if one assumes that the ACA will cover no one on the Exchange because there will be no insurers on the Exchange. That is a plausible counter-factual. It is one that can be defended with a straight face.
However, let’s think about the implication of that counterfactual. In this scenario, the ACA will cover no one. Covering no one means the federal government spends no money….
Iowa has a lot of money that could be available for state innovation or BHP programs with Medica staying in the market. But now they can’t meet the qualification that the cost sharing be no worse for people under a 1332 than under the ACA. If Iowa continues down the path of a 1332, there will be even more lawyers.