Rate Filing Justification Part II Memorandum
Effective January 1, 2027
Scope and range of rate increase
Wellmark of South Dakota, Inc. (Wellmark) has requested an average rate increase of 6.7% for ACA-compliant policies effective January 1, 2027. Rate increases vary by plan and region, ranging from 2.6% to 11.9%, and do not include rate changes due to age of the members on the policy. As of March 31st, 2026, there are approximately 11,000 individual members in the pool. Most of the members in the pool are eligible for a premium subsidy and may not experience a post-subsidy rate change within the range above.
Financial experience of the product
Wellmark anticipates 2026 experience will be worse than the target loss ratio. Applying the requested rate increases, Wellmark projects a loss ratio of 90% for this block of business in 2027. It should be noted that the projected Medical Loss Ratio (MLR) meets the minimum requirement of 80% defined in the ACA.
Changes in benefits
Plan design changes were made to Wellmarkâs 2027 product offerings. These changes drive rates down for 2027. Rate changes provided above incorporate the impact of plan design changes.
Changes in medical service costs
Annual trend of 4.2% was used to project claims from the experience period into the rating period and drives rates up for 2027. This trend assumption includes changes in service costs and utilization.
Administrative costs and anticipated profits
The main drivers of administrative expenses are employee salaries and benefits, broker and agent commissions, and various governmental taxes and fees. Wellmark strives to maintain a low administrative expense as a percent of premium, as well as the underlying cost of care, in order to provide the best value to our customers. With a decrease to the Exchange User Fee, smaller government fees in 2027 are driving rates down.
American Rescue Plan enhanced subsidy expiration
The enhanced subsidies afforded in the American Rescue Plan expired in 2026. Wellmark anticipates this change will result in worse market risk, driving rates up.