Commissioner Receives Reports on Wellmark

Iowa Insurance Division



Commissioner Receives Reports on Wellmark 

Reports examined company surplus and impact of company market share


Des Moines, November 8, 2011 – Two studies of Wellmark, an Iowa health insurance company, have been completed and submitted to Iowa’s Insurance Commissioner Susan Voss.  Voss had ordered these studies done as part of her review of Wellmark during the rate review hearings for Wellmark’s individual rate increases requested to be approved for use April 1, 2012.  During the rate review process, some comments and questions were received which were based on assumptions that Wellmark had such a large market share that it was adversely impacting consumers and that the company was holding too much in its financial reserves, even while seeking to raise individual rates.


Two independent firms were selected for the separate topics.  One firm, Baker and Daniels, of Indianapolis, was assigned to examine whether Wellmark’s market share impacts Iowa consumers adversely. Another firm, Invotek Group, of Baltimore, examined the level of surplus held by Wellmark to determine if the amount was appropriate.


The market share examination came to several conclusions.  According to the report, “Wellmark’s market share does not appear to impact adversely”:

·         The premiums paid by Iowa consumers.

·         The quality or quantity of health care received by Iowa consumers.

·         The customer service received by Iowa consumers.

·         The products that Iowa consumers have to choose from.

At the same time, the report found that Wellmark’s market share could potentially impact Iowa consumers by limiting their choice of health insurance companies.  Relative to this potential impact, the report noted that a recent change made by Wellmark, one in which it moved away from production and retention requirements for its agents, would be to the benefit of consumers. There has been some shrinkage in recent months in the number of insurers who will continue to compete in the individual health insurance market, most recently seen in the withdrawal from that market by Des Moines-based American Republic Insurance and World Insurance.


The second report dealt with the appropriateness of the amount of surplus held by Wellmark. In the context of insurance, surplus is precisely defined as the excess of an insurer’s admitted assets over its liabilities as measured on a regulatory basis of accounting. That report reached these conclusions:

·         Before considering the impact of health care reform, there is no evidence that Wellmark’s surplus is currently excessive.

·         The report then said, “While it is not currently possible to determine an amount of increased surplus relating to the PPACA reforms, it is clear that more surplus would be required, not less.” Factors identified as driving the need for more surplus associated with the Affordable Care Act included: minimum loss ratio standards with related rebate requirements, health insurance exchanges, taxation changes to support health care reform and the potential business impact of state-based cooperatives.

“It’s helpful to have this information,” said Voss. “As we examine companies for compliance and solvency and as we consider the appropriateness of rate increase requests, it’s good to be able to draw upon solid external analytical work in addition to the resources of our own internal staff.  These reports will help us make better-informed decisions.”


Wellmark recently submitted a rate increase request for a 9.35% average base increase for its individually issued plans (not employer group plans or Medicare supplement plans) to be effective on April 1, 2012, if approved.  Consideration of that request is underway.  A public hearing is scheduled for December 10 at a Des Moines site and several ICN sites throughout Iowa.  (The listing of statewide ICN sites for the hearing and the full contents of the two Wellmark reports can be found via links in this document or on the Insurance Division’s web site.)


About the Iowa Insurance Division

The Iowa Insurance Division (IID) has general control, supervision and direction over all insurance and securities business transacted in the state, and enforces Iowa’s laws and regulations. The IID investigates consumer complaints and prosecutes companies, agents and brokers engaging in unfair trade practices. Consumers with insurance or securities-related questions or complaints may contact the IID toll free at 877-955-1212 or visit the division on the web at