Duke University Margolis Centre research associate David Anderson has pointed out that the Des Moines-based Wellmark Blue Cross and Blue Shield is caught in an insurance catch-22 with an extreme outlier who suffers from a rare genetic disease that requires $1 million in medical claims per month.
Anderson, as quoted by specialty publication
Becker’s Hospital CFO Report, said in his blog post: “In a competitive market where the subsidies are tied to the second least expensive Silver (plan) and there is one super-outlier who cannot be reinsured against, every carrier lives in fear of being chosen by the one outlier.
“If they set their rates low enough to be attractive to healthy people, they lose money on the catastrophic expected claims. If they set the rates high enough to cover a $12 million claim, no-one buys their product.”
Wellmark sent notices to its 30,000 policyholders last spring, saying it would increase rates by an average of 40% this year, and that 10% of the increases are due to the claims that need to be covered for the outlier.
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To address such extreme cases, Anderson recommended that the “super-outlier” be removed from the risk pool, while using general taxes to pay for the patient’s healthcare, which could reduce premiums by $10 per member, per month.
However, the exception of the patient does not diminish the issues that face the Iowa healthcare market. Anderson pointed out in the publication that “that Iowa’s exchange market is facing many of the same challenges as those in other states, such as transitional, underwritten health plans covering most of the profitable individual market.”
For this reason, Wellmark chose to opt out of the state’s healthcare exchanges for next year. The carrier had been implementing double digit rate hikes to cope with the $90 million losses it has sustained over the last three years, the report said.
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