Iowa’s dominant health insurer is taking a hit this year on earnings for its health plans in Iowa, despite double-digit premium increases on individual health plans approved last year by state regulators.

 

Wellmark’s health maintenance organization, Wellmark Health Plan of Iowa Inc., reported a $1.06 million year-to-date net loss for the first six months of 2016, compared with a profit of $4.04 million for the same period a year ago, according to filings with the Iowa Insurance Division.

Wellmark Inc., which operates the company’s preferred provider organization (PPO) plans, recorded a nearly $11 million net loss in the first six months of 2016, about the same amount as it lost in the first six months of 2015.

“We had anticipated this year that it would be a rough year for underwriting results,” said David Brown, Wellmark’s chief financial officer. “So far we’re tracking fairly closely to expectations.”

Wellmark last year received approval for premium increases of 24.5 percent for 23,000 policyholders with Affordable Care Act PPO plans and 28.7 percent for about 7,300 of its individual HMO policyholders with ACA plans. Individual policyholders with non-ACA plans had average percentage increases in the teens, and group rate increases ranged from the high single digits to low double digits, Brown said.

Wellmark is continuing to see large increases in health care costs that are trending higher than initially expected, particularly in pharmaceutical prices, Brown said. Another challenge is that under the provisions of the Affordable Care Act, pricing for the current year plan must be done further in advance, so 2016 rates were based on 2014 data, he said. Additionally, costs in the individual market continue to be dramatically higher than in the group markets.

“We made the best estimates we could at the time,” Brown said. “It turns out that (the rising costs) we saw continued to happen through 2015, and 2016 was even a bit worse. It just continues to be very challenging.”

Because Wellmark targets for net income in the range of zero to 3 percent, “it’s not surprising when you lose a little bit of money because we’re targeting low to begin with,” he said. “But we still feel from a capital perspective that we are in a very strong position and our members should not be worried about our ability to be behind them.”

Two leading national insurers that compete with Wellmark in the Iowa market, Aetna and Unitedhealthcare, are also reporting lower earnings so far this year. Aetna Health of Iowa Inc. reported a $3.3 million loss for the first half of 2016, compared with a $2.4 million cumulative loss for its Iowa operations in the first half of 2015. Unitedhealthcare of the River Valley, based in Illinois, saw a 50 percent reduction in its profits companywide in the first half of 2016, with year-to-date net income of $43.4 million, compared with $95.8 million year-to-date net income in 2015.

Coventry, which is owned by Aetna, last year received approval for a 19.8 percent premium increase on individual ACA policies. Unitedhealthcare, which earlier this year announced it would exit the individual market in Iowa in 2017, last year did not seek a premium increase large enough to trigger an Iowa Insurance Division review.

Medica, a Minnesota-based insurer which entered the Iowa and Nebraska individual health care markets this year, reported companywide net income of $4 million for the first half of 2016, compared with a net loss of $7.3 million for the same period last year.

“It’s a challenging business model (for pricing) that’s for sure,” said Dannette Coleman, senior vice president and general manager for individual and family business for Medica. The company offers only individual plans in Iowa, but has said it may add group coverage in the future.

“We are seeing a slightly higher medical utilization than expected, but not enough for concern, Coleman said. “Nothing that we saw that will cause us to drastically change our approach.” Medica offers individual plans both on and off the Marketplace.

Medica, which also expanded into Nebraska last year and also offers coverage in Minnesota, North Dakota, South Dakota and Wisconsin, does not break out financial results by state. Coleman said Medica has established a small membership foothold in Iowa with expectations for growth next year.