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Wellmark, other health insurers get okay for rate hike

August 26, 2015
From: Iowa Insurance Division , Toledo Chronicle, Tama News-Herald

2016 Wellmark Pre-ACA Iowa Rate Proposal Review Decision

Issued August 25, 2015

The Iowa Insurance Division (the "Division") received an annual individual health insurance premium rate ("rate") filing in May, 2015 for Wellmark's grandfathered and transitional individual plans from prior to the federal Patient Protection and Affordable Care Act ("ACA"). Wellmark proposed a rate increase, varying by plan, effective January 1, 2016, of an average of 17.6% for approximately 104,000 policyholders. After review and analysis, the Division approved a rate increase of 17.6%. Rates for 2016 were based on Wellmark's experience with existing grandfathered and transitional individual business, and projected member movement from the entire insured and uninsured population. The rate filings were reviewed to ensure the proposal is justified based upon the experience of the plans and whether the proposed rates are expected to produce an 80% medical loss ratio ("MLR") for 2016.

Rate Filing and Review Procedures

Pursuant to a Governor's directive from 2010, and in accordance with Iowa Code section 505.15, whenever any health insurance company that conducts business in Iowa submits a health insurance premium rate increase request to the Division, the Iowa Insurance Commissioner (the "Commissioner") must utilize an independent, qualified third-party actuary to conduct a secondary review to determine the adequacy and appropriateness of the proposed rate. The Division maintains a list of independent actuarial firms, and selected Lewis and Ellis to perform the independent actuarial review. The report of Lewis and Ellis is available here. Specific tests and criteria used to determine the validity of the request is outlined in each of the detailed reports. The independent review is performed simultaneously with the statutorily required Division in-house review.

In addition, Iowa Code section 505.19 requires the Commissioner to hold a public hearing on a proposed health insurance rate increase which exceeds the average annual health spending growth rate as published by the Centers for Medicare and Medicaid Services of the United States Department of Health and Human Services ("CMS"). The current rate is 6%. Prior to the public hearing, the Consumer Advocate for the Division solicits and receives public comments on the proposed health insurance rate increase. Those comments are posted online here.

A hearing on the proposed rate was held on Saturday, July 25, 2015 at 10:00 a.m. at the Mercy College of Health Sciences, Sullivan Center, Des Moines, Iowa. Access to the hearing was made available at six locations around the state via the Iowa Communications Network ("ICN").

The Commissioner reviewed the actuarial reports from Lewis and Ellis. The Commissioner also consulted with financial and actuarial staff within the Division.

Consumer Concerns and Issues

The Consumer Advocate has received comments or concerns directly from policyholders or members of the public which may be viewed at:

Conclusion and Decision

As indicated above, the rate increase proposal was 17.6% for Wellmark's traditional and grandfathered pre-ACA plans. This block of plans had a loss ratio of over 90%, which is well in excess of the Federal medical loss ratio requirement of 80%. The 2015 incurred loss ratio (as opposed to MLR) is just under 90%. With high loss ratios being generated and coupled with a trend that appears to be strengthening it would not be justified actuarially to modify the proposal lower.

The Commissioner studied the actuarial report, and consulted with various Division staff regarding the Wellmark rate increase proposal. Whether to approve the rate increase is not a decision the Commissioner has taken lightly. Many Iowans will be impacted by this decision. Balancing the needs of Iowa consumers and the solvency of an insurance carrier must be weighed carefully.

The Commissioner finds that there is no evidence that the proposed rate filings are discriminatory or excessive under Iowa statute. The Commissioner therefore approves the proposed individual rate increase filed by Wellmark for implementation.



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