UnitedHealthcare, Medica want to sell health insurance in Iowa

Minnesota health insurers have set their sights on Iowa.

Minnetonka-based Medica announced Thursday plans to start selling policies to individuals and families in Iowa on Nov. 1, with coverage beginning in 2016.

Meanwhile, officials with Minnetonka-based UnitedHealthcare say they're seeking regulatory approval to sell coverage on Iowa's health insurance exchange.

The federal Affordable Care Act has driven significant changes in the market for individual policies, including the launch of health exchanges where people can tap sizable tax credits.

Iowa has the lowest adoption rate in the country of people who are eligible to buy their insurance on the state's health exchange, said Dannette Coleman, a senior vice president at Medica.

"We think we can help improve that," Coleman said, noting that Iowans who purchased a health plan with tax credits on the exchange receive, on average, a $263 reduction in their monthly premium. "There are subsidies available, but few people are taking advantage of that."

Currently, there's only one health insurer selling policies on the health exchange in Iowa, which is operated by the federal government. Wellmark Blue Cross & Blue Shield is the dominant health insurer in Iowa, and the company has stayed out of the state's exchange.

"If Blue Cross was in the exchange, I think you'd see a lot more people in the exchange," said Eric Kohlsdorf, a health insurance agent with Prisma Strategies in Des Moines. "We absolutely need competition."

This year, UnitedHealthcare significantly expanded its presence on health exchanges across the country, growing from four states in 2014 to 23 states this year. Iowa is part of further expansion plans for 2016, said company spokesman Tyler Mason.

UnitedHealthcare already is a big player in other parts of the Iowa health insurance market, including the off-exchange market for people buying non-group coverage.

Medica is new to the state. The company must launch a marketing campaign to consumers, Coleman said, while also forging relationships with insurance agents.

Policies sold in Iowa will feature access to "centers of excellence" care at the Mayo Clinic in Rochester, including travel, lodging and meal stipend for the patient and a companion. Medica hasn't previously offered travel benefits as part of health insurance, Coleman said. The company thinks access to the Mayo Clinic for certain serious diagnoses will be a selling point, since parking lots at in Rochester routinely feature "a lot of Iowa license plates," Coleman said.

Iowa is the first new state for Medica since 2003. The company also sells coverage in North Dakota, South Dakota and Wisconsin.

In 2014, Bloomington-based HealthPartners started to work with "self-insured" customers in Iowa and Nebraska. Previously, the company sold insurance just in Minnesota, North Dakota and Wisconsin.

"We continue to evaluate further expansion, but don't have anything new to announce right now," wrote HealthPartners spokesman Vince Rivard in an e-mail.

The federal health law has created incentives for insurers to expand by helping stabilize and grow health insurance markets, said Stephen Parente, a health policy expert at the University of Minnesota. There's an added benefit, Parente said, for Medica to go up against UnitedHealthcare in Iowa.

UnitedHealthcare provides claims processing and other back-office services for Medica's commercial group customers in Minnesota. Because of the vendor relationship, the companies don't compete in Minnesota, Coleman said.

The business relationship has prompted speculation over the years about closer ties between the companies, so the Iowa move could help "dispel this idea that Medica is part of UnitedHealthcare," Parente said. The companies can compete in Iowa's individual market, Coleman said, because UnitedHealthcare doesn't handle Medica's back-office work for individual market customers.

Medica posted strong financial results for 2014 in its fully-insured business, with operating income of about $123.5 million on $3.38 billion in revenue.

Currently, Medica has about 1.5 million members across commercial and government health insurance markets in Minnesota, North Dakota, South Dakota and Wisconsin.

UnitedHealthcare is the nation's largest health insurer. It's part of UnitedHealth Group Inc., which for 2014 posted net income of $5.6 billion on $130.5 billion in revenue.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck