Wellmark still worries over temporary tax hike

A proposal to temporarily increase a state tax on health insurance premiums to help cover a $1 billion shortfall in the state budget will impact Wellmark Blue Cross and Blue Shield, the state's largest health insurer, much less than the company originally feared, Wellmark officials and state administration leaders said. But the potential financial impact remains a concern for the company.

Gov. Kim Reynolds' administration has proposed legislation that would temporarily increase a state tax on health insurance premiums as a way to raise $123 million to help cover the state budget shortfall.

On Wednesday, Wellmark Director of Government Relations Brandon Geib during a legislative hearing on the proposal told lawmakers it would increase taxes on the company by more than $50 million. On Thursday, administration officials met with Wellmark, and the parties determined the impact would be roughly half that.

In an email, Geib said the company's original interpretation of the bill was that it would tax both premiums received and claims paid. Geib said the administration later clarified the intent is to tax only premiums received.

Geib said that still would amount to a tax increase on Wellmark of at least $24 million in 2026.

"This $24 million dollar tax hike remains a staggering increase that will increase health care costs for our members. Retroactively increasing taxes by tens of millions of dollars does nothing to improve the affordability of health insurance in Iowa," Geib said in the email. "We remain committed to working with the governor, the legislature and other stakeholders to mitigate the impact of this bill on Iowans."

Iowa Insurance Division Chief Operating Officer Chance McElhaney confirmed the agency's discussion with Wellmark and the resolution on the projected cost impact.

Under the proposal, Senate Study Bill 3182, the state tax on health insurance companies would increase from .925 percent to 3.5 percent for the first nine months of 2026, then revert to .95 percent.

That would boost state revenues by $123.6 million in the next budget year, according to projections from the Iowa Department of Health and Human Services, and because of its retroactive provision, by $38.3 million in the current budget year.

Iowa Senate Republicans, who advanced the bill through the first two steps of the state lawmaking process this week, said they are open to discussing how the bill might be amended to help soften the financial impact on health insurance companies.

"We want to try to work something out with Wellmark and some of the providers that are being booked into this process, maybe unfairly, and try to come up with some type of an agreement," Sen. Tim Kraayenbrink, a Republican who chairs the Senate's budget committee, said Thursday. "We don't want to lose our insurance industry. That's important to us as well."

Reynolds, speaking to reporters during a news conference Thursday at the Iowa Capitol, said the proposal attempts to address increasing Medicaid costs to the state. She said in addition to needing to pass the Iowa Legislature, the plan also would need to be approved by the federal Centers for Medicare and Medicaid Services.

"We have a Medicaid shortfall. That's the main driver of this, and that would help address that. It's pretty significant," Reynolds said.

Comments: erin.murphy@thegazette.com