DES MOINES, Iowa (AP) -- Two state senators have demanded an investigation into whether Iowa's dominant health insurer really needs $1.3 billion in reserves.
Sens. Jack Hatch and Matt McCoy, both Democrats from Des Moines, said Tuesday that they questioned Wellmark Blue Cross & Blue Shield's reserves because Wellmark has decided against participating next year in the state's health insurance exchange.
"Much of that $1.3 billion reserve should go back to the policyholders," said Hatch, who delivered a letter Monday to Insurance Commissioner Nick Gerhart, asking for the investigation.
Hatch, who is considering running for governor in 2014, said state regulations require the insurer to have reserves of only $350 million.
Wellmark Chief Financial Officer David Brown said the reserve funds were necessary for a company of Wellmark's size to ensure that they can pay medical bills for policyholders. He said the company pays out about $5 billion a year in claims, noting that $350 million is less than a month's claims.
"There are many things that are really important in choosing an insurance company. The most important is that if you get sick or hurt, that we'll be there to pay your bills," Brown said. "We need the reserves to make sure we're always able to pay those bills, even if there's something like a major health crisis or a pandemic."
Brown also noted that Wellmark plans to participate in the insurance exchange in 2015. Wellmark insures about 1.7 million Iowa residents.
Wellmark customers have complained about repeated rate increases in recent years. Last month, the insurer said it will limit premium increases in 2014 to less than 6 percent for individual and small business policyholders.
Gerhart said in a statement that he has not decided if a review of Wellmark's reserves is necessary, but that it remains a possibility. He said the department is currently busy working to get the state ready for the implementation of the federal health care overhaul.
"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," Gerhart said.