Monday, August 29, 2016

2017 Wellmark Health Plan of Iowa (HMO) Pre-ACA Rate Proposal Review Decision

Issued August 29, 2016


The Iowa Insurance Division (the “Division”) received an annual individual health insurance premium rate (“rate”) filing for Wellmark Health Plan of Iowa’s (HMO) transitional individual plans from prior to the federal Patient Protection and Affordable Care Act (“ACA”) in May, 2016.  Wellmark Health Plan of Iowa proposed an average rate increase of 42.6% for transitional individual plans, with variations by plan, effective January 1, 2017, for approximately 2,300 policyholders.  After review and analysis, the Division approved a rate increase of 42.6% for transitional individual plans.  Rates for 2017 were based on Wellmark Health Plan of Iowa’s experience with existing transitional individual business, and projected member movement from their book of business. The rate filings were reviewed to ensure compliance with ACA requirements and instructions from the Centers for Medicare and Medicaid Services of the United States Department of Health and Human Services (“CMS”), to ensure that the proposal is justified based upon the experience of the plans, and to ensure that the proposed rates can be expected to produce a medical loss ratio (“MLR”) of at least 80% for 2017.

Rate Filing and Review Procedures

Pursuant to a Governor’s directive from 2010, and in accordance with Iowa Code section 505.19, 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 Magnum Actuarial Group to perform the independent actuarial review.  The report of Magnum Actuarial Group is attached to this press release.  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 6.4%.  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 here.

A hearing on the proposed rate was held on Saturday, July 23, 2016 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 Magnum Actuarial Group.  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 here.

Conclusion and Decision

As indicated above, the rate increase proposal was 42.6% for Wellmark Health Plan of Iowa’s transitional pre-ACA plans.  This block of plans had an incurred loss ratio of over 127% (for 2015), which is well in excess of the Federal medical loss ratio (MLR) requirement of 80%.  The 2017 projected incurred loss ratio after the 42.6% rate increase is implemented, is still expected to be around 90% -- which is significantly above the federal requirement of 80%.  With high loss ratios being generated and coupled with a strong trend, it would not be justified to modify the proposal lower.

The Commissioner studied the actuarial report, and consulted with various Division staff regarding the Wellmark Health Plan of Iowa 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 Health Plan of Iowa for implementation.

Dated August 29, 2016


Nick Gerhart

Iowa Insurance Commissioner