(Continued from page 22)

• The demand came after Wellmark opted not to participate the new federal health insurance exchange in 2014. Customers have also been angry with Wellmark for steep rate increases, although the insurer only raised 2014 rates to offset new fees required of insurers under the Affordable Care Act.
• Hatch said the report showed that Wellmark was stockpiling money "at the high end" of what was appropriate.
• "This company is trying to have it both ways," he said. "They raised rates on Iowa consumers because of the Affordable Care Act. And they want a near maximum reserve in place to protect them against the cost of the ACA while they are not participating in its programming."
• Wellmark has said it will participate in the exchange in 2015. A new Wellmark rival, Cooportunity Health, which is offering plans through the exchange, had no immediate comment.
• The consultant suggested that Wellmark should work with its board to determine when the market has stabilized and make adjustments to the size of its surplus then.
• Wellmark notes that $1.3 billion, the amount in reserves at the end of 2012, is enough to cover three months of claims. The company pays $5 billion in claims annually for policyholders, including 1.8 million in Iowa and 300,000 in South Dakota.
• Wellmark's chief financial officer, David Brown, said the review confirmed the company was looking out for members, calling the reserves "a critical safety net for our policyholders."
• "Our customers expect that if they get sick, their insurance company will be able to pay their medical bills," he said in a statement. "Our reserves ensure we can always pay those bills, even if there is a major health crisis like a pandemic or natural disaster."
• In the report, the Farmington, Conn.,-based consultant said the current level of reserves is "reasonable and prudent" given the uncertainty the insurer currently faces. Wellmark faces "adverse selection risk," the possibility that not enough young, healthy people will sign up for insurance to offset higher medical expenses of those with pre-existing conditions, the report said.
• Wellmark could also suffer major losses if the stock market crashed -- it lost $350 million in the downturn of 2008 -- or if a number of affiliated insurers failed in Iowa and South Dakota. The latter is a possibility if the federal reforms do not work as intended, the report said.
• "The current capital and liquidity provide adequate resources to deal with potential shocks without having a disruptive impact on the stakeholders in Iowa and South Dakota," the report said.

(Continued on page 24)