Wellmark plans 38% to 43% increases for some customers

Tens of thousands of Iowans who buy their own health insurance are about to receive a shock in the mail.

Wellmark Blue Cross & Blue Shield is sending letters this week telling about 30,000 customers it plans to raise their premiums by 38 percent to 43 percent next year.

Wellmark sells about three-quarters of individual policies in Iowa’s health-insurance market. The steep increases will affect people who bought relatively new plans that comply with rules of the Affordable Care Act.

Another 90,000 Wellmark customers who hold older individual insurance plans are expected to face smaller increases, which will be announced in June. The increases being proposed this week also don’t affect the hundreds of thousands of Wellmark customers who obtain coverage via their employers. Their premiums are expected to rise less, because they are in larger, more stable pools of customers.

Wellmark Executive Vice President Laura Jackson said poor health and rising medical costs forced the company to seek state permission to raise premiums so aggressively on the plans in question. She said the company spent $1.27 on health care last year for every dollar in premiums it took in for those customers. The company says it lost $99 million on those customers in the past two years.

She said about 10 percentage points of the increase stem from the costs of a single, extremely complicated patient who is receiving $1 million per month worth of care for a severe genetic disorder.

Jackson noted many insurers nationally are planning large premium increases, for similar reasons. About two-thirds of the costs are for treatment of chronic diseases, many of which are preventable, she said. Many of the problems are related to factors such as smoking, unhealthful eating and lack of exercise. “It’s a whole lot of lifestyle, with a little bit of genetics thrown in,” she said.

Medica, a much smaller health insurance carrier, is seeking an increase of nearly 20 percent on individual policies in Iowa. A spokesman declined to say how many Iowans would be affected. Coventry, which also sells individual health insurance plans in Iowa, declined to comment on how much it plans to increase premiums next year. The companies had to file their proposals with the state insurance division by Wednesday, but the division is not yet releasing the information publicly.

Gary Claxton, a vice president for the Kaiser Family Foundation, noted that many of the Wellmark customers in question could receive federal subsidies to help them pay premiums in 2017. Wellmark in the past has declined to offer policies that qualify for the Affordable Care Act subsidies, which are tied to consumers’ income. But the company will offer such policies for 2017. Claxton said even with the premium increase, some of the customers might wind up spending less on health insurance next year because of the change.

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Claxton, whose foundation studies health care issues, said it’s too soon to tell whether Wellmark’s proposed increases will be in line with others nationally. But he said some carriers are having to dramatically increase prices to correct for underestimating the cost of new customers, including those who previously couldn’t get insurance because they had pre-existing health problems. Because of the Affordable Care Act, also known as Obamacare, insurers are no longer allowed to deny coverage or charge more based on such conditions.

Claxton added that part of the reason for premium increases this year is the federal government is phasing out assistance for carriers that took on risky customers under the Affordable Care Act. He said rates should stabilize as the market adjusts to the new conditions.

The proposed premium increases filed this week need approval from State Insurance Commissioner Nick Gerhart, who plans to hold a hearing July 23. Wellmark's Jackson testified at a similar hearing last year. “I’ll just be blunt: Rate increases stink,” she said then. “They do. And it is not something that any of us take in a light-hearted fashion.”

After last summer’s hearing, Gerhart approved increases of 18 percent to nearly 29 percent for individual Wellmark customers. He expressed sympathy with consumers’ complaints, but noted independent experts determined the increases were needed to cover rising health care costs.

Wellmark officials stress that they're continuing to try to rein in costs, including those due to overuse of tests, treatments and medications. For example, the company is announcing this week that it will offer a new “Blue Simplicity” option, which will encourage consumers to consider costs of care by having clear co-payments for services.

The set co-payments, which could range from $35 for a standard doctor’s office visit to $4,500 for a hospitalization, are designed to let customers know exactly how much they’ll be expected to pay before they undergo tests or treatment. In most current plans, Jackson said, many customers are stunned to learn after treatment that they’re on the hook for hundreds or thousands of dollars. Their current out-of-pocket charges are often based on “co-insurance,” which is figured as a percent of what clinics and hospitals charge.

“The whole goal was to make these simpler,” she said of the new plans. “There’s no math required.” Once customers reached an annual out-of-pocket maximum, say $6,000, the insurance company would cover all additional costs.

The new plans also will set copay levels for medications based on how cost-effective they are, Jackson said. Ones that are highly effective could cost consumers little or nothing, even if they cost Wellmark a lot, she said. For example, a hepatitis drug that costs thousands of dollars but cures the disease could draw small copays. But copays in the hundreds of dollars could be charged for drugs that the company’s experts see as ineffective, such as new classes of high blood-pressure medications.

Wellmark also is announcing this week that it has formed new insurance companies to offer policies in partnership with the Des Moines-based Mercy Health System and the University of Health System in eastern Iowa. Those plans will cost a bit less than other Wellmark products, but will require participants to get most of their health care from either Mercy or the UI-affiliated providers. Organizers hope those plans will lead to better coordination of care, which could improve outcomes and save money.

Wellmark and other insurers have tried numerous approaches to encourage members to live more healthful lives and consider the cost and value of medical treatments. Jackson said she wishes those efforts had prevented the need to keep raising premiums. “It doesn’t make you want to stop trying, but it’s definitely disappointing,” she said.

Jackson said trends related to the Affordable Care Act have contributed to the cost increases but are not the main cause. For example, she said, people now have more freedom to buy insurance after they become seriously ill, then drop the coverage after being treated. Although the law now requires most people to have continuous coverage, the penalties aren’t strong enough to prevent people from gaming the system, she said.  She also cited fast-rising costs of prescription drugs, including “specialty drugs” for such conditions as hemophilia and multiple sclerosis.