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2020 ACA Rate Change Justification

Scope and Range of Rate Increase

Wellmark Health Plan of Iowa (WHPI) requested an average rate increase of 4.7% for ACA-compliant policies effective January 1, 2020. Rate increases were approved by the Iowa Insurance Division. Rate increases vary by plan, from 0.5% to 5.9%, and do not include rate changes due to age of the members on the policy.

Financial Experience of the Product

Applying the approved rate increases, Wellmark projects a loss ratio of 89% for this block of business in 2020. It should be noted that the projected Medical Loss Ratio (MLR) meets the minimum requirement of 80% defined in the ACA.

Changes in Medical Service Costs

Annual trend of 8.5% was used to project claims from the experience period into the rating period. This trend assumption includes any change in service costs and utilization.

Changes in Benefits

Plan design changes were made to Wellmark's 2019 product offerings. All plans maintained their existing metallic level. Rate changes provided above incorporate the impact of plan design changes.

Administrative Costs and Anticipated Profits

Administrative expenses reflect the change in the costs to administer health benefits for members. This includes claims processing, customer service, provider contracting, network access, government compliance, agent commissions and risk margin. Wellmark strives to lower our administrative expenses as a percent of premium, as well as the underlying cost of care, in order to provide the best value to our customers. The annual Health Insurer Fee was reinstated for 2020, and accounts for approximately 3.5% of premium.

For the 2020 effective rate increase, Wellmark reduced risk/profit margin from 5.5% to 5.0%.

Scope and Range of Rate Increase

Wellmark Value Health Plan (WVHP) requested an average rate increase of 4.8% for ACA-compliant policies effective January 1, 2020. Rate increases were approved by the Iowa Insurance Division. Rate increases vary by plan, from 0.7% to 6.2%, and do not include rate changes due to age of the members on the policy.

Financial Experience of the Product

Applying the approved rate increases, Wellmark projects a loss ratio of 89% for this block of business in 2020. It should be noted that the projected Medical Loss Ratio (MLR) meets the minimum requirement of 80% defined in the ACA.

Changes in Medical Service Costs

Annual trend of 8.5% was used to project claims from the experience period into the rating period. This trend assumption includes any change in service costs and utilization.

Changes in Benefits

Plan design changes were made to Wellmark's 2019 product offerings. All plans maintained their existing metallic level. Rate changes provided above incorporate the impact of plan design changes.

Administrative Costs and Anticipated Profits

Administrative expenses reflect the change in the costs to administer health benefits for members. This includes claims processing, customer service, provider contracting, network access, government compliance, agent commissions and risk margin. Wellmark strives to lower our administrative expenses as a percent of premium, as well as the underlying cost of care, in order to provide the best value to our customers. The annual Health Insurer Fee was reinstated for 2020, and accounts for approximately 3.5% of premium.

For the 2020 effective rate increase, Wellmark reduced risk/profit margin from 5.5% to 5.0%.