June 5, 2017

The $12 million patient who could break an ACA exchange

Daily Briefing

A patient whose care reportedly costs health insurer Wellmark Blue Cross & Blue Shield $1 million per month sheds light on challenges facing the Affordable Care Act's health insurance exchanges—and provides a window on policy changes that insurers may seek in the future.

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A $12 million patient

According to Wellmark, the patient in Iowa has hemophilia, a severe genetic disorder that affects blood clotting. Last year, Wellmark said, the individual accounted for 10 percentage points of the insurer's rate hike for beneficiaries participating in Iowa's individual market—and this year, the insurer said it is withdrawing from the state's individual market entirely, citing the individual as an "extreme example" of rising health care costs.

Now the other main insurers selling individual plans—Aetna and Medica—have indicated they will likely withdraw from Iowa's individual market as well, and health insurance experts have speculated that they may be avoiding the market for fear of winding up with the ultra-expensive patient in their risk pool.

As David Anderson, a research associate at Duke University, put it, whoever ends up covering the patient "basically can't make money."

In explaining its decision to withdraw, Wellmark leaders said the individual market's risk pool in Iowa  simply is not large enough to adequately spread the costs of the patient's care. According to the Des Moines Register, the Iowa patient is currently in a pool of about 30,000 individuals.

But the challenge may be larger than this one patient, according to Iowa Insurance Commissioner Doug Ommen. He argued that too few young, healthy consumers are participating in the individual market, even as many patients with chronic conditions are signing up for insurance. "We have a concentration of people with persistent health conditions," he said. "It's not just one person."

Spreading the cost

According to Axios' "Vitals," the patient's plight draws attention to an ongoing challenge in the debate over health care reform: how best to cover patients who require high-cost treatment—without driving insurance premiums to unaffordable levels.

The Affordable Care Act aimed to address that concern with a two-pronged approach: first, by requiring insurers to cover people regardless of pre-existing conditions to ensure that everyone has access to coverage; and second, by requiring all individuals to purchase insurance so as to create a broad-based risk pool that can split the costs of expensive patients.

But the Iowa patient tests the limits of the ACA's design because in any given exchange market, the risk pool may not be large enough to adequately spread an ultra-expensive patient's cost. If insurers fear getting stuck with the bill for such a patient, they can pull out of a particular market altogether—and "without insurance options, [the ACA's] protections don't mean much," Vox's "VoxCare" notes.

However, "VoxCare" reports that a "last-minute change" the Obama administration made to the ACA before leaving office could help insurers cover high-cost patients. Under the change, slated to take effect in 2018, costs for patients whose bills exceed $1 million would be spread across all insurers participating in the ACA exchanges nationwide.

Larry Levitt, senior vice president at the Kaiser Family Foundation, said, "This would help insurers in Iowa, if there are any, since the cost of this patient would be spread across all individual market insurers nationally."

However, the ACA's future is uncertain amid ongoing efforts to repeal and replace the law.

Ommen is calling on Congress to establish regulations designed to encourage insurers to remain in markets such as Iowa's, including policies such as reinsurance programs or a "reinvigorated high-risk pool" (Leys, Des Moines Register, 5/31; Nather/Baker, "Vitals," Axios, 6/2; Scott, "VoxCare," Vox, 6/1).

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