Over the past couple of years there has been a mystery in the Iowa individual insurance market.
According to Blue Cross Blue Shield insurer Wellmark, there was a patient in the state’s Affordable Care Act, or Obamacare, exchanges that required $US1 million a month in care. This staggering $US12 million in care per year was distorting the insurer’s exchange business and forcing them to raise premiums across the exchange at a rapid pace.
While the identity (rightfully) of the patient has not been revealed, a Wellmark executive did tell a Rotary club meeting that the person was a teenage boy with hemophilia, a genetic disorder which prevents blood from clotting, according to the Des Moines Register.
The story is heartbreaking, but it also has implications for the insurance market in the state.
The Wellmark executive told the meeting that the high costs were causing the insurer to raise premiums for the broader system and the case reportedly was one of the reasons that Wellmark decided to pull out of the Iowa exchanges for 2018.
On a broader scale, this one case also shows why Obamacare’s exchanges are facing problems — and why they have been saviors for many sick Americans.
This particular case is special, according to the Des Moines Register. The cost of care for most hemophiliacs tops put at $US1 million annually (which is still incredibly costly). This case is an extreme example of the problems facing the Obamacare markets.
Obamacare mandated that insurers cover people even if they had preexisting conditions that insurers previously could use to deny coverage. According to Larry Levitt, senior vice president at nonpartisan health policy think tank The Kaiser Family Foundation, this naturally led to some problems.
“Of course, making insurance more accessible for people with pre-existing conditions has also created challenges for the stability of the individual insurance market,” Levitt told Business Insider. “Covering the cost of very expensive patients raises the potential need for a reinsurance pool of some sort that existed in the first three years of the ACA and is part of the [American Health Care Act].”
Reinsurance is a policy that provides some federal funding to offset insurers’ higher costs incurred from covering a sicker pool of patients.
The Iowa case also fits in with the general trend of more older and sicker people signing up for ACA plans than originally expected since the exchanges came online.
In turn, premiums increased dramatically and insurers suffered substantial financial losses. Losses were so great at some insurers (especially those who mismanaged their plan structures) that they decided to leave these markets.
Levitt also said that a smaller market like Iowa’s is even more problematic because there are fewer healthy people in the risk pool to offset the cost for an insurer like Wellmark.
While these issues certainly need to be fixed in order to provide a more stable market for everyone in the exchanges, the story also gives a strong example for why Obamacare has been a success as well.
It is apparent that, from the insurer’s side of things, the structure of the Obamacare markets presents a substantial issue when facing such high expenses. From the patient’s side of things, however, the ACA is likely a godsend.
As pointed out by Levitt, some of the regulatory changes in Obamacare most likely saved the patient’s family from serious financial stress and possibly serious health consequences.
“An expensive patient like this would have faced any number of challenges getting and affording health care before the ACA,” Levitt told Business Insider on Thursday. “Such an expensive condition would be a whopping pre-existing condition, and no insurer would have offered him insurance.”
A provision of Obamacare, community rating, obligates insurers to price premiums the same for people of the same age in the same area. This prevented people with preexisting conditions from being charged more than healthy people and getting priced out of the market.
Without that provision, an insurance company could raise premiums for a sick patient substantially to offset some of their costs, but the price could be so high that it would be financially crippling for the patient’s family.
Additionally, the ACA eliminated lifetime limits for insurance plans. Prior to the ACA, insurers could set a cap on how much they would pay out to a patient over the course of their life.
“Annual and lifetime limits on benefits were common in the individual insurance market and in employer plans before they were prohibited by the ACA, and this patient would have blown through such limits quite quickly,” Levitt said.
Thus, pre-ACA, the massive financial burden for this patient would have likely fallen on the family.
The Iowa case serves as a reminder of the real human impact of policy changes made in Washington at the same time the Senate deliberates on its own version of a healthcare bill.