April 24, 2014 | 7:36 am
Wellmark proposed a 9.35 percent increase for more than 70,000 individual Iowa customers age 65 and under, citing rising health care costs.
"The real reason here is the cost of health care is going up and continues to rise," said David Brown, the company's chief financial officer. "The largest driver is utilization, people are using services more and unfortunately people in Iowa are getting less healthy."
Brown said that is, in part, because of the growing obesity epidemic. Laura Jackson, a vice president of health strategy and policy, said obesity is linked to 20 chronic conditions and cancer and the costs of treating those conditions keeps rising with new treatment innovations.
Wellmark insures about 1.8 million Iowa residents, most through employers. A public hearing on the increase is scheduled for Dec. 10 at the Urbandale Public Library.
The proposed increase follows an 8.5 percent rise imposed in April and an 18 percent increase in 2010.
Having another increase that would go into effect in April 2012 is unacceptable, said Hugh Espey, executive director for Iowa Citizens for Community Improvement.
"It's outrageous ... that in the midst of a big economic crisis, consumers are being asked to pay more," Espey said. "Our advice is to back off. In fact they should lower their rates given the economic crisis we're in."
According to the Wellmark website, the company's assets in 2010 totaled more than $2.1 billion, up from about $1.9 billion in 2009.
Jackson said the decision to increase rates "is never easy for us."
"We don't take it lightly," she said. "It's not a faceless approach to delivering a rate increase."
Jackson said Wellmark is working with health care providers to reduce the use of services, which would in turn reduce expenses by creating what she described as accountable care programs, in which providers could be reimbursed for working with patients on preventative programs, such as nutritional counseling.
Brown said customers should be assured that the vast majority of the increase would go to pay medical costs. He said 88 cents of every dollar is spent on medical expenses, with 12 cents going toward administrative costs.
Brown said the construction of a downtown campus in Des Moines is not a factor in the increase. The building, which consolidated several other locations in the city, has reduced expenses and increased efficiency, he said.
"We're saving money compared to where we were at," Brown said.
Besides notifying customers of the proposed increase, Wellmark also notified state insurance regulators of its plan Monday. The state's insurance commissioner had lowered the company's proposed 11 percent in April to 8.5 percent, calling the initial proposal excessive.