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Iowa Obamacare program on verge of collapse as congressional uncertainty takes its toll

(Photo by Joe Raedle/Getty Images)

Iowa’s last major Affordable Care Act insurer threatened on Wednesday to pull out from the state’s marketplace next year, the latest step in a sudden collapse of the state’s insurance marketplace that holds ominous signs for health care customers in states across the county.

If Minnesota-based Medica follows through on its threat not to sell plans in 2018, Iowa could be the first state to lack any insurers on its exchanges in all but a handful of counties. At the start of 2017, Iowa outwardly appeared to be an Affordable Care Act success story, with three insurance companies selling competing plans on its exchanges broadly. But last month, two of Medica’s competitors said they would exit the state’s marketplace next year, citing financial losses. And on Wednesday, Medica released a statement saying its continued participation “is in question.”

Iowa’s precarious position reveals how the departure of one insurance company from an exchange can have a domino-like effect on its competitors. If a company pulls its plans over financial concerns, it’s often because it is losing money on too many sick members and too few healthy ones. The plans that stay in the game will likely inherit its members — and the financial challenge they pose.

“It appears, at least on the surface... that this has created this cascading effect of insurers following each other on the market, not wanting to be the last one holding the bag,” said Cynthia Cox of the Kaiser Family Foundation. “This could happen in other states that appear to have good competition and a good number of insurers participating.”

The situation in Iowa also reveals the increasing local-level toll levied by Congress’ wrangling over the Affordable Care Act. The insurance industry, which has long depended on stability, is trying to is trying to react to a highly uncertain political environment that shows no signs of stabilizing soon.

Health-care experts say the Affordable Care Act is stable, but President Trump and congressional Republicans could push it over the cliff into a "death spiral." (Video: Daron Taylor/The Washington Post)

Amid arguments in Congress about the future of health reform, insurers must make practical decisions in the next two months whether to sell plans in the marketplace next year. Billions of dollars in federal payments that help reduce deductibles and out-of-pocket costs have become a political football, with politicians refusing to commit to long-term promises about the payments. And the future of the marketplaces longer-term is hard to read amid the uncertain fate of Republican attempts to repeal or replace the law.

Meanwhile, insurers are making their moves. Aetna announced Wednesday that it would pull out of Virginia’s individual marketplace next year, as it was on track to lose more than $200 million this year on insurance sales to individuals.

“Aetna’s decision to leave the Virginia marketplace in 2018 shows the real-life consequences of President Trump playing politics with health care and unfortunately Virginians will be the ones paying the price for his actions,” Sens. Tim Kaine and Mark Warner said in a joint statement.

Meanwhile, Anthem chief executive Joseph Swedish said in a earnings call last week that his company, which has 1.1 million members in the exchanges, is weighing many factors when considering where to sell plans in 2018. Swedish added that if there isn’t a commitment to funding the federal payments that reduce out-of-pocket costs, called cost-sharing reductions, his company would consider exiting marketplaces, curtailing its participation and raising rates.

Currently, Medica participates statewide in Iowa’s marketplaces and has 12,645 members through the Affordable Care Act exchanges, making it the third-largest insurer in the state’s exchanges.

Geoff Bartsh, a vice president at Medica, said that the insurer wouldn’t make final decisions until the state’s rate filing deadline of June 19. Before its competitors pulled out, the company was considering shrinking its participation area in the state.

“The absence of any competition or any of the other carriers accelerated the decision that we won’t be statewide,” Bartsh said in an interview. “For us, as a small carrier in Iowa, the unknown risks far outweigh the known risks. Our ability to offer products statewide knowing we’d be the only option for the 70,000 individuals in this market are just too great.”

Bartsh said that for Medica to remain it would need some certainty and some policy fixes. He cited the steps that Minnesota lawmakers took to set up a half billion dollar reinsurance fund to help insurers pay for the highest-cost patients, for example, or the establishment of a high-risk pool to cover such individuals.

“We need some consistency in the rules; we can’t be in a situation where we file rates expecting one thing, then state or federal government changes the rules,” Bartsh said.

If Medica quits the exchanges, it will leave Gundersen Health Plan, which only offers plans in five counties, as the state’s lone remaining insurer. The company has not decided whether to continue offering plans in 2018, spokeswoman Jennifer Dinehart said.