Iowa review finds Wellmark's reserve funds 'reasonable and prudent'

Similar review in 2011 had similar findings

Published: February 27 2014 | 5:00 am - Updated: 29 March 2014 | 4:13 am in

Wellmark Blue Cross and Blue Shield's $1.3 billion financial reserves are "reasonable and prudent," according to an Iowa Insurance Division report out Wednesday.

State Sen. Jack Hatch, D-Des Moines, who is running for governor, and other critics believed the company had too much in its reserves. Hatch called for the company to return much of the reserves to customers and introduced a bill last week giving the insurance commissioner power to order refunds if reserves are found to be excessive.

But the independent review, conducted by Risk and Regulatory Consulting LLC, concluded that Wellmark's "capital and liquidity provide adequate resources to deal with potential shocks without having a disruptive impact on its policyholders in Iowa and South Dakota."

The insurance company, which has more than 2 million policyholders in Iowa and South Dakota, has stated that it pays out about $5 billion in claims each year and noted that $1.3 billion is enough to cover about three months worth of claims.

The six-page report states that, based on the high transition risk created by the Affordable Care Act and the continued difficulty in determining the financial impact of the ACA, the amount of reserves on hand are proper.

"This review confirms that Wellmark is running our business in the best interest of our members," said David Brown, Wellmark’s chief financial officer, in a press release.

Wellmark paid $250,00 for the review. A similar review of Wellmark’s reserves was commissioned by the Iowa Insurance Division in 2011. That study, conducted by Invotex Group, also confirmed that Wellmark’s reserves were proper, if not too low, given the impact of health care reform.

"Reserve funds are a sound business practice and part of our fiduciary obligation to our policyholders to run our business effectively," Brown said.

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