DES MOINES: Representatives from an outside insurance review firm said giving the state’s insurance commissioner the authority to order refunds if a health insurance company’s reserves were excessive isn’t a bad idea, but lawmakers should hold off on instituting such a law for now.
CPAs Pat Tracy and Craig Moore with Risk and Regulatory Consulting, a Connecticut-based national firm, spoke to the Senate Commerce Committee Thursday to explain their review of Wellmark Blue Cross and Blue Shield’s $1.3 billion financial reserve.
The consulting firm released their report in February that stated the state’s largest health insurance company had a “reasonable and prudent” reserve given potential risk factors including the implementation of the Affordable Care Act on the market.
Several Democratic lawmakers remain concerned about the company’s ability to build up its reserves and maintain subscribers’ high premiums. Sen. Jack Hatch, D-Des Moines, proposed legislation this session to allow the state’s insurance commissioner to order refunds if a health insurance company’s reserves were deemed excessive. The bill passed through committee but wasn’t taken up by the Senate.
Tracy said such a policy would work but to hold off until the market stabilizes. He said the best method, if refunds were needed, would be through a rate reduction process.
Hatch, who’s running for governor, asked whether the company sidestepped any potential risks by not participating in the exchange marketplace established under the Affordable Care Act. Moore said the enactment of the Affordable Care Act, in general, poses potential risks regardless of whether a company participates in the exchange.
Hatch, and other Democrats, remain skeptical of what the company is doing with such large reserves.
“Those reserve accounts should be directed back toward the best issue for the consumer and I’d like to think that would be lowering their premiums,” he said afterwards in an interview.
Tracy said Wellmark isn’t the only company shoring up its reserves as the Affordable Care Act continues to be tweaked and prolongs the period of potential risk. Tracy said given recent changes, including the federal government’s extension of certain insurance policies, it could be 2017- 2018 before the market stabilizes.
“There’s too much uncertainty, you want a cash cushion,” Tracy said.
Wellmark controls 80 percent of the market for individuals and 60 percent of the market for small businesses. The company provides coverage for more than 2 million policyholders in Iowa and South Dakota.
Iowa Insurance Commissioner Nick Gerhart was out of the state and not at the hearing Thursday. Gerhart called for the independent $250,000 review following legislative skepticism over the significant reserves.