If you live in Iowa, and you buy insurance on the Obamacare exchange for individual plans, you might want to make sure you’re near an emergency room when you check the rates for 2018. Because you might well have a stroke.
Iowa is scheduled for the largest premium increases in the land next year, a whopping 69% according to health care consultancy Avalere. The average premium on the benchmark “silver” plans will rise to $1,000 a month.
What is going on in the state of Iowa? A rash of tragic combine accidents? Are Iowans getting lung diseases from all that corn pollen blowing about on the wind?
Not quite. What’s happening in Iowa is sick people. Lots and lots of sick people cramming into an individual market that doesn’t have enough healthy patients to offset their costs.
In particular, some have suggested, one sick person: a hemophiliac whose treatment is costing $1 million a month. Iowa is a small state, and its exchange only covers about 50,000 people a year. This leaves it more vulnerable than larger states to bad outcomes, because it doesn’t take too many rare cases to push an insurer into the red. The potential for catastrophe is higher for each insurer, because of course, they cover only a fraction of the total pool.
“Everyone is trying to avoid the $12 million man,” Duke University research associate David Anderson told Politifact. “Because whoever catches him basically can’t make money.”
Apparently that one patient reads the news, and is aghast at the implication that he is, all by himself, destroying Iowa’s market for health insurance. Jonathan Cohn of the Huffington Post interviewed his family — and reassured him that it’s not true. Iowa, Cohn says, is imploding because of a combination of bad decisions by Republican lawmakers, and structural problems inherent in rural markets.
I was intrigued by the issue, so I spent some time looking at the numbers. Is Cohn right, or the folks faulting the $12 million man? The answer I came up with was: both of them, sort of.
Let’s start with the cost of that patient. I was unable to find data on the number of individual policies sold in Iowa, so let’s assume a generous case for the prosecution of our beleaguered hemophiliac: Those 50,000 people are all in families of four, which would mean that 12,500 policies were sold. If that’s the case, it works out to roughly $950 a year per policyholder, which is a great deal of money. But Avalere predicts an average premium of $12,000 a year.
That’s a theoretical maximum for what he is costing his fellow policyholders. And it’s not nearly enough to account for all of Iowa’s cost problem. On the other hand if we use more reasonable assumptions, the number falls. If all 50,000 policies are individual policies, then he’s costing folks about $250 a year, or $20 a month. That’s not nothing, of course, but it is a small part of the overall issue.