Wellmark has too much money set aside in its reserves and Iowa officials should investigate, two Democratic state legislators say.
Iowa Sens. Jack Hatch and Matt McCoy are questioning whether Wellmark, the biggest insurer in Iowa, needs $1.3 billion in reserves--or about $620 for each of its 2.1 million members--when regulations only require insurers to carry $350 million in reserves, the Des Moines Register reported.
They are particularly skeptical of such large reserves after Wellmark chose not to participate in the state's health insurance exchange.
"Health insurance premiums are high enough without families having to add money to Wellmark's books," Hatch wrote in a letter to Iowa Insurance Commissioner Nick Gerhart. "The company would appear to be financially healthy and prepared to meet the needs of its policyholders. It is time some of its reserves and surplus funds be returned to Iowans in the form of premium rebates."
The lawmakers want Gerhart to conduct an investigation into the reserves, but the Commissioner told the Register his office is currently focused on analyzing insurers' applications to sell plans on the exchange.
Wellmark execs responded to the lawmakers' claims, explaining that reserves don't exist in a bubble. "That sounds like a lot of money. If you just think about it in a vacuum, you go, 'Wow, $1.3 billion, that's a lot,'" David Brown, Wellmark's chief financial officer, said during a press conference, according to another Register article.
Since the insurer spends about $400 million per month in medical claims, the reserves are just more than three months' worth of claims, which could be needed if health costs unexpectedly surge from, for example, a disease pandemic. "It doesn't take a lot to start eating into those reserves, so we really need to maintain significant levels," Brown said.