Iowa state senator says $1.3 billion Wellmark cash reserve 'obnoxious'

State Sen. Jack Hatch, D-Des Moines, called the $1.3 billion in reserves held by the state's largest insurer “obnoxious” and said he wants the company to return most of it to policyholders.

But Wellmark Blue Cross/Blue Shield officials say the reserve, while large, is only about three months' worth of claims for the company, which has 2 million policyholders in Iowa and South Dakota.

Hatch, who is considering a 2014 run for governor, said the reserve fund is nearly four times what the state of Iowa requires insurers to hold, and he has asked Insurance Commissioner Nick Gerhart to order a premium rebate for policyholders.

“Much of that reserve was calculated on the implementation of the Affordable Care Act,” Hatch said. “Since that is now fully implemented, the risks have been reduced, and it is our belief that much of that $1.3 billion reserve should now go back to the policy-holders … in light of the decision of Wellmark not to participate in the insurance exchange.”

The insurance exchange is part of the Affordable Care Act, which requires states to offer a marketplace for insurance policies to individuals who do not otherwise have access to them. Last week, Gerhart's office announced six companies applied to offer policies on the exchange. Wellmark did not, but CEO John Forsyth said the company plans to offer policies in 2015.

“We have not yet decided if another review of Wellmark's reserves is needed, although we had already mentioned that we were considering this several weeks ago. That action remains a possibility,” Gerhart said in an emailed statement. “However, at this time our immediate focus must remain on the established duty we have to fulfill our commitment to review the applications we received from companies wishing to offer qualified health plans on the Iowa Health Insurance Marketplace.”

Hatch hosted the news conference on the rooftop of downtown office building where he keeps his real estate development office. It has a clear view of Wellmark's Des Moines headquarters located across a park.

Wellmark officials attended Hatch's news conference and then invited reporters to their own news conference in the Wellmark lobby, which began about 20 minutes after Hatch's concluded.

There, Wellmark Chief Financial Officer David Brown staked out the company's position, which essentially is that a large reserve is needed in case of a catastrophic event.

“If you listen to financial experts, they say a family should save about three to six months of expenses in savings,” he said. “Insurance companies need reserves for the same reason.”