Grassley asks Wellmark for information about rate increase

WASHINGTON – Senator Chuck Grassley is asking Wellmark for information about its plan to increase health insurance rates.

In a letter sent today, Grassley requested an accounting of the factors considered, including any independent actuarial analysis, data about reserves, and documentation of the insurer’s effort, announced in 2007, to make itself a true nonprofit.

“I’m asking because Iowa consumers deserve to know, and as the health care debate in Washington continues, insurance rate increases are a major issue. The health reform legislation
passed last year would not drive costs down. In fact, health reform bills passed by the House and
Senate would cause premiums to go up even more than they already would have gone up,
according to the Congressional Budget Office,” Grassley said.

The text of Grassley’s letter to Wellmark is here.

Mr. John Forsyth
Chairman and Chief Executive Officer
Wellmark Blue Cross and Blue Shield
636 Grand Ave
Des Moines, IA 50309-2565

Dear Mr. Forsyth:

As the senior senator from Iowa and Ranking Member of the Senate Committee on Finance, I am writing regarding Wellmark Blue Cross and Blue Shield’s plan to increase health insurance premiums by as much as 22 percent on April 1, 2010. At a time of record unemployment rates and sluggish wage growth, I’m concerned that a rate increase of this magnitude could force some Iowans to drop health insurance entirely. This would not only have a negative impact on the health of Iowa citizens, but could also place a greater financial burden on providers that will be forced to deliver more uncompensated care.

Recent reports have stated that Wellmark Blue Cross and Blue Shield plans to raise premiums by an average of 18 percent for approximately 80,000 of its 1.8 million customers.

This is almost twice as much as last year’s 9.3 percent increase. Moreover, some 44,000 Wellmark beneficiaries will see rate increases as high as 22 percent. I’m particularly concerned
about the level of these increases since the Centers for Medicare and Medicaid Services’ Office
of the Actuary recently reported that health care spending increased by a much lower rate of 5.7
percent in 2009. I understand that the individual and small group health insurance markets face
unique challenges regarding adverse selection and that the recent economic downturn has likely
exacerbated these challenges. However, I also believe Iowans deserve a clear explanation for
why premiums are increasing at a much faster rate than national health care spending.

As Ranking Member of the Senate Committee on Finance, I take my oversight responsibilities very seriously and I have always believed that greater transparency allows consumers to make better choices. Accordingly, in an effort to obtain more information about Wellmark’s plan to increase health insurance rates on April 1, 2010, I ask that you respond to the following questions and requests by no later than March 8, 2010. In responding, please repeat the question followed by the appropriate response.

1. What factors were taken into consideration when coming up with the health insurance rates
for 2010?

2. Were the 2010 rates reviewed by any independent actuarial firms before being presented to
the Iowa Insurance Division? If so, please provide a copy of this independent analysis and any
supporting documentation.

3. Please provide a report on Wellmark’s average Medical Loss Ratio in its individual and small
group products for each of the last five years along with a description and explanation of the
factors involved.

4. Please provide a report on the amount held in reserves for each year for the past five years
along with an explanation of how Wellmark Blue Cross and Blue Shield’s reserves compare to
any minimum levels required by the Iowa Insurance Division, and whether Wellmark utilized
any reserves to mitigate rate increases for 2010 or for any year within the five year period.

5. In 2007, Wellmark announced its goal to be a pure non-profit and reduce profits to 0 percent.
Please provide copies of Wellmark’s Form 1120, U.S. Corporation Income Tax Return, for the
past five years. Please also provide copies of all studies and reports used to determine
compensation for the officers listed on Schedule E of Form 1120.

Thank you for your attention to this important matter. While there are strong differences
of opinion on how to improve the U.S. health care system, there is widespread agreement that
health care spending levels are unsustainable. Your answers to the questions listed above will
not only be informative for Iowa consumers, but will also be helpful as Congress considers
potential policy solutions.

Sincerely,

Charles E. Grassley
Ranking Member

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