Dear Mr. Forsyth:
As the senior senator from Iowa and Ranking Member of the Senate Committee onFinance, I am writing regarding Wellmark Blue Cross and Blue Shield’s plan to increase healthinsurance premiums by as much as 22 percent on April 1, 2010. At a time of recordunemployment rates and sluggish wage growth, I’m concerned that a rate increase of thismagnitude could force some Iowans to drop health insurance entirely. This would not only havea negative impact on the health of Iowa citizens, but could also place a greater financial burdenon providers that will be forced to deliver more uncompensated care.
Recent reports have stated that Wellmark Blue Cross and Blue Shield plans to raisepremiums 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 44,000Wellmark beneficiaries will see rate increases as high as 22 percent. I’m particularly concernedabout the level of these increases since the Centers for Medicare and Medicaid Services’ Officeof the Actuary recently reported that health care spending increased by a much lower rate of 5.7percent in 2009. I understand that the individual and small group health insurance markets faceunique challenges regarding adverse selection and that the recent economic downturn has likelyexacerbated these challenges. However, I also believe Iowans deserve a clear explanation forwhy 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 oversightresponsibilities very seriously and I have always believed that greater transparency allowsconsumers to make better choices. Accordingly, in an effort to obtain more information aboutWellmark’s plan to increase health insurance rates on April 1, 2010, I ask that you respond to thefollowing questions and requests by no later than March 8, 2010. In responding, please repeatthe question followed by the appropriate response.
1. What factors were taken into consideration when coming up with the health insurance ratesfor 2010?
2. Were the 2010 rates reviewed by any independent actuarial firms before being presented tothe Iowa Insurance Division? If so, please provide a copy of this independent analysis and anysupporting documentation.
3. Please provide a report on Wellmark’s average Medical Loss Ratio in its individual and smallgroup products for each of the last five years along with a description and explanation of thefactors involved.
4. Please provide a report on the amount held in reserves for each year for the past five yearsalong with an explanation of how Wellmark Blue Cross and Blue Shield’s reserves compare toany minimum levels required by the Iowa Insurance Division, and whether Wellmark utilizedany 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 thepast five years. Please also provide copies of all studies and reports used to determinecompensation for the officers listed on Schedule E of Form 1120.
Thank you for your attention to this important matter. While there are strong differencesof opinion on how to improve the U.S. health care system, there is widespread agreement thathealth care spending levels are unsustainable. Your answers to the questions listed above willnot only be informative for Iowa consumers, but will also be helpful as Congress considers potential policy solutions.
Sincerely,
Charles E. Grassley Ranking Member
