Wellmark Blue Cross and Blue Shield announced this morning that it will not participate in the state health insurance exchange until 2015, a decision its CEO said was largely driven by concerns for customer quality.  

“We continue to support health care reform and the State of Iowa has been very responsive to our questions and concerns,”said John Forsyth, Wellmark’s chairman and CEO, in a prepared statement.  “However, given what we know today, we do not believe during the first year of the public exchange we could ensure the exceptional level of service our members have come to expect from Wellmark.”

Iowa Insurance Commissioner Nick Gerhardt could not be immediately reached for comment. Gerhardt has been exhorting insurers in recent weeks to participate in the exchange to assure competition in its first year of operation. Each state is mandated to have an exchange operating on Jan. 1, 2014; the deadline was June 30 for insurers to notify the state whether they would participate. Click here to read a related Business Record article.

In a telephone interview with the Business Record, Forsyth said one of Wellmark’s biggest reservations was the ability to integrate its IT system with the exchange’s IT system, a process that could require a minimum of six months of testing to ensure all the potential bugs are worked out.

“We thought about how (difficult) Medicare Part D implementation was, and that legislation was one-twentieth as complex as this was,” Forysth said. “The tipping point on this was, we wanted to make sure our policyholders continued to have an excellent experience. But we knew that we would disappoint many of our policyholders if we didn’t go on the exchange.”  

Asked if its decision to delay participating in the exchange could be viewed as anticompetitive, Forsyth said it’s really the opposite.

“Anticompetitive would be to go on the exchange and price really low,” he said. “If anything this is procompetitive because there’s a substantial segment of the market we won’t be able to reach in the first year. If in fact we were trying to dodge risk, that might be the case.”

By delaying its participation for a year, Wellmark may be able to avoid having to participate in the Small Business Health Options Program (SHOP) exchanges, Forsyth said. “If you have more than 20 percent market share in the small group market, you have to be in the SHOP the first year. That’s a pretty significant investment; there’s no way we’d ever get a return,” he said. “We have reason to believe that that will be changed for year two and won’t be required.”

Wellmark’s decision also postpones an additional 3.5 percent federal tax that would have passed along to policyholders, which would have driven its rates up this year, he said.

Wellmark recently announced it is offering its current individual and small business groups the option to extend their current health insurance coverage through Dec. 30, 2014 in the individual market and through Nov. 30, 2014 in the small group market.  The insurer said the only premium increase those policyholders will receive are those associated with new costs related to the Affordable Care Act, estimated at less than a 6 percent increase.