IOWA CITY, Iowa (AP) -- Months after customers blasted the company for years of skyrocketing rates, Iowa's dominant health insurer said Tuesday it will limit premium increases in 2014 to less than six percent for individual and small business policyholders.
Wellmark Blue Cross and Blue Shield said in a statement it would not raise premiums to cover any increases in general medical or administrative costs in 2014. Instead, the Des Moines-based mutual company said it would only raise rates to offset the new fees required of insurance carriers under the Affordable Care Act.
The decision will impact 330,000 members in Iowa and South Dakota who purchase health insurance directly from Wellmark, or who get their insurance through small businesses with less than 50 employees. Wellmark, which insures roughly 1.8 million customers in Iowa and 300,000 in South Dakota, did not specify how larger group policies would be affected.
The plan comes after an increase of 12 or 13 percent went into effect for 146,000 Wellmark individual and business customers on April 1.
Hundreds of Wellmark customers had spoken out against the company online or at a January public hearing. Critics said they were tired of Wellmark's annual rate increases, which were 9.4 percent in 2012, 8.5 percent in 2011 and 18 percent in 2010. They decried the impact on their family budgets and questioned Wellmark's administrative costs. But Iowa's insurance commissioner approved the rate hikes, citing increasingly expensive health care costs.
Wellmark executives said they were able to hold down rates next year due to a number of factors, including an assumption that their pool of individual and small business customers may be healthier and have less expensive benefits. They said their efforts to tie provider payments to outcomes and promote healthy lifestyles may also be paying off.
Separately, Wellmark said Tuesday it would offer individual and small business group members the option of keeping current health insurance plans through Dec. 31, 2014, rather than be required to switch to new, more expensive plans that have the mandatory benefits required under the Affordable Care Act.
Wellmark said customers will still have the ability to switch to ACA-compliant plans Jan. 1 depending on which option suits them best. Some of the notable differences include mental health and maternity benefits that are not currently covered but will cost more.
"We are rewarding our valued members with today's announcements," Wellmark Chairman and CEO John Forsyth said in a statement. "As a mutual company, Wellmark is owned by its policyholders and these decisions are designed to provide them with maximum flexibility and choice while minimizing their increase in cost. The extension provides additional time to become more informed about what the changes in the market mean without losing the current coverage they know and trust."
The chief executive officer of one new Wellmark rival, Des Moines-based CoOportunity Health, questioned whether Wellmark's moves were designed to undermine the implementation of Iowa's new health exchange. Starting Oct. 1, customers will be able to shop for coverage through Iowa's exchange and qualify for subsidies and benefits required under the federal health care law.
Wellmark's decisions could discourage some customers from looking for new plans while sending a potentially less healthy applicant pool to the exchange than anticipated, which could drive up costs for insurers who participate, CEO David Lyons said.
Wellmark said it would announce in early July whether it will participate in Iowa's exchange and was still evaluating its options, rejecting the idea that it was trying to undermine the program.
Still, Lyons said Wellmark's decision to lower its rate hikes was a dramatic example of the new competition that the health law had unleashed.
"I think anything that generates additional value for consumers is good," he said. "I just hope it doesn't create an environment where the competitive pressures that are creating this opportunity today won't be around to ensure it continues in the future."