The future of Obamacare will be written by insurers like this one

(Photo by Patrick T. Fallon/Bloomberg)

As the last option standing in two states’ Affordable Care Act marketplaces for next year, a small Midwestern health insurer faces a decision that could become a symbol of the law’s failure or of the last-minute political compromises needed to keep its markets intact.

While large, national insurers’ pronouncements about the future of the marketplaces have been closely followed, it is insurers like Medica — a nonprofit, regional health plan with 1.2 million members — who will determine whether or not people can buy insurance next year. Medica’s competitors in Iowa and Nebraska have announced they will drop out next year, making the company the likely last guard against a scenario that leaves exchange participants with zero options for buying their own health coverage.

Last week, Medica issued a threat that without government action, it might leave Iowa‘s exchange. The company promptly found itself mentioned in President Trump’s Twitter feed, touted as evidence of the "broken system" that would be solved by House Republicans’ health care bill. This week, Aetna — Medica’s only current competition on the marketplace in Nebraska — announced it would pull out of the exchange next year.

"The insurance markets in two states are now hanging by a thread, held together at this moment by a small, midwestern plan that most people had ever heard of before," said Larry Levitt, a vice president at Kaiser Family Foundation. "The big national insurers have essentially abandoned the marketplaces, and they were very skeptical to begin with. … It’s not the big traditional commercial insurers that have made this market, that have been offering coverage in this market and succeeding."

While each state’s market is different, Medica’s predicament provides a window into the challenges and major business decisions that all insurers face for next year. Amid a fluctuating political, competitive and regulatory landscape, companies are coming up on deadlines to decide whether to offer insurance on the exchanges next year and what rates to charge. 

And while Democrats and Republicans have engaged in a heated blame game over who’s to blame for the exchanges’ uncertain future, it has yet to produce any of the solutions that companies seek, even as the deadlines to decide whether or not to sell plans next year approach.

"It is challenging to stay focused on our mission to provide access to high quality affordable health care when there’s noise around the system and a lack of clarity of rules," said John Naylor, chief executive of Medica, who called the amount of uncertainty being thrown at insurers at the moment unprecedented. "With our social mission, we’re like the little engine that could — we’re chugging away."

Obamacare spurs a company to grow

Medica was founded 42 years ago by physicians, its roots in Minnesota and in the business of selling insurance to employers. About a decade ago, the company began to expand into neighboring states — North Dakota, South Dakota, Wisconsin. After the Affordable Care Act became law, the company began to expand its footprint further, selling insurance to individuals in three new states: Iowa, Nebraska and Kansas.

The challenges of growing in these new areas was something the company was prepared for — its leaders said it would be a journey that would take years, but it fit the plan’s regional expertise and community focus. Last year, it broke even in its individual insurance business in two states, but lost money in the rest, including Iowa and Nebraska.

"We have to build brand recognition and we have to get in and serve the members, but first and foremost we need a set of rules to be able to design products and price products, so that we can properly quantify the risks," Naylor said. "So, as we went into these markets, there were pretty clear rules in a given year: Here’s how the market works. And then, all of a sudden, the rules changed."

In a week in April, two insurers announced in quick succession they would drop out of Iowa for next year — raising the prospect that Medica, which currently had about 20 percent of the market, would quintuple its membership if it stayed in the market. There is one other insurer in Iowa, but it currently offers plans in only 5 counties. Within days, Naylor and two other executives piled into a 10-year-old Lexus and made a three and a half hour road trip to Des Moines to speak to regulators and lawmakers about policy solutions that could help them stay in the market — and perhaps even attract competitors.

Medica’s executives advocated for the state or federal government to help. A risk pool for the sickest people who use the most health care resources could relieve pressures on insurers; Iowa, for example, has a single patient that has medical costs of about $1 million a month. A reinsurance program that could help pay for people with unusually high claims could also help. And they wanted assurance that cost-sharing payments made by the federal government to defray out-of-pocket costs for lower-income people, which have become a political football, would be paid in 2018.

So far, they have not gotten what they sought. This week, in an interview with The Economist, President Trump once again threatened to stop paying the cost-sharing reductions.

"You know when people say, ‘Oh, Obamacare is so wonderful,’ there is no Obamacare, it’s dead," Trump said. "Plus we’re subsidizing it and we don’t have to subsidize it. You know if I ever stop wanting to pay the subsidies, which I will."

Uncertainty takes its toll

Last week, Medica warned that it might have to withdraw from Iowa completely — a move that could leave the vast majority of the state without any options. This week, Aetna announced it would pull out of Nebraska, leaving Medica as the only other plan currently selling plans on the marketplace.

"Our goal is to be in these communities, and the interesting thing of being a nimble, regional health plan is we’re kind of agile and nimble in terms of going with the punches," Naylor said. "Who would have thought a month ago, we’d be sitting here?"

In Nebraska, where Medica has more than 36,000 individual members, executives aren’t making the same ominous threats as they are in Iowa. A Blue Cross Blue Shield plan is selling insurance off the exchange this year.

"We want to stay on," Naylor said. "Their state legislature is committed to a market that’s actually working well right now."

But behind that desire is a flurry of activity. Naylor said the company is gaming out all kinds of different scenarios — "variations on variations" — as the company tries to assess what its premiums would need to be under different conditions.

On the ground in the state, things are also uncertain. The director of the Nebraska department of insurance, Bruce R. Ramge, sent out a cautionary notice after the Aetna announcement, noting that as of now, no companies have committed to selling individual insurance plans next year.

"If no companies sell on the exchange, people who previously had subsidies may not be able to obtain them.  Those individuals would have to turn to plans sold off of the exchange to satisfy the individual mandate," Ramge wrote. "If no insurer were selling on or off of the exchange in the individual market, the individual would not be subject to the individual mandate."

Chance McElhaney, the spokesman for the Iowa Insurance Division, said that the individual market has been a money-losing business for insurers and Medica’s concerns need to be addressed by Congress. "This is causing significant angst among Iowa consumers who depend on the individual market for health coverage," McElhaney said in an e-mail.

Over the next two months, Trump’s statement that Obamacare is exploding could become a self-fulfilling prophesy, due in part to uncertainties that the White House and Congress have thus far refused to resolve. Many health policy experts expect to see more insurers withdraw from states, curtail their participation or raise their rates. The possible repercussion of one insurer leaving could be an amplification of risk for those that remain, since they will almost certainly inherit members that their competitors found financially challenging.

"The risk that in Iowa or somewhere else you have counties with no coverage, no insurers participating, is real and I think it’s reasonably likely in 2018," said Caroline Pearson, a senior vice president at Avalere Health. "The ACA doesn’t have a solution for that situation."

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