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Two Rivers subsidiary accused of overbilling

Apr 21, 2014

BURLINGTON (AP) – Iowa’s largest insurance provider has accused a southeast Iowa insurance broker of overcharging for its products and has asked the state to investigate the company, Two Rivers Insurance.

Potentially as many as 10,500 government employee policies are affected with millions of dollars in premiums at stake, including those in Fairfield and Jefferson County. Jefferson County Attorney Tim Dille said today the county is complying with the state’s subpoena for records.

Des Moines-based Wellmark Blue Cross and Blue Shield has terminated its agreement with Two Rivers Insurance, but local officials assure area city, county and school employees covered through the Burlington company they are in no danger of losing their health insurance. Meanwhile, Two Rivers officials deny any wrongdoing.

The dispute was disclosed Thursday in a front-page story in the Des Moines Register, though local government officials said they were notified the prior week by Two Rivers.

Two Rivers Insurance had, until recently, purchased Wellmark health insurance through an insurance wholesaler for government entities, acting as a broker.

Traci McBee of Wellmark said the company severed its relationship with Two Rivers April 9 because Two Rivers “marked up some of its customers’ health insurance premiums without Wellmark’s knowledge,” according to the Register.

McBee said policyholders who received a bill from a Two Rivers subsidiary, Employee Benefit Systems, appear to have been affected. Wellmark initiated an audit, then reported its concerns to state regulators.

As a third-party provider, EBS provides self-insured or partially self-insured benefits to government entities, such as dental, eye care, flex billing, claims service and explanation of services. Those fees are passed on to individual members.

Wellmark accuses Two Rivers of marking up premiums 4 to 7 percent without distinguishing between third-party self-insured services and Wellmark’s, according to the Register.

A local governmental insurance group, COBCO or City-County Health Care Plan, does not agree the fees and charges were unclear or that the group has been over-charged.

“We feel that these are very market-value rates,” said Stephanie Stuecker, Burlington director of administrative services.

Burlington City Manager Jim Ferneau concurred.

“[Two Rivers Insurance] disclosed their fees as we’ve gone through all the yearly renewals,” he said. “There are two fees, a broker fee, which is a little over 3 percent, and administrative costs for the third-party plans, which are passed on to individual employees.

“What’s at issue is not whether it was disclosed, but how it was disclosed on the individual billing statements. That’s an issue for the Iowa Insurance Division to determine. But the COBCO board has no issue with fee disclosure,” Ferneau said.



Wellmark has identified four government insurance groups that may have overcharged for its services, according to the Register:

* The Iowa Governmental Health Care Plan, with 33 employers and 6,700 members.

* The Southeast Iowa Schools Consortium, with 11 schools and 1,300 individual members.


* The Iowa Star Schools Consortium, with 18 employers and 1,700 members.


* COBCO, with eight employers and 500 members (Two Rivers said the number published by the Des Moines Register, 800, is incorrect).


Besides the City of Burlington and Des Moines County, COBCO includes the cities of Danville and Mediapolis, the Two Rivers Levy Drainage District, Southeast Iowa Regional Airport, Burlington Municipal Waterworks and the Des Moines County Regional Waste Commission.


The school systems affected belong to the Southeast Iowa Schools Consortium and include Burlington Notre Dame Schools, Fort Madison, Keokuk Catholic, Keota, Louisa-Muscatine, Morning Sun, Mount Pleasant, Pekin, Southeastern Community College and West Burlington and the Great Prairie Area Education Agency.


“We are in the process of checking into this,” said David Schmitt, superintendent of the West Burlington School District. “It’s too early to tell right now if we are affected.”


The Burlington School District will not see any impact.


“We do not have an agent for health insurance,” said Chris Stensland, business manager for the Burlington School District. “We deal directly with Wellmark so we are not impacted.”


Stuecker said Wellmark did not notify local governments of its concerns.


“I had to seek them out,” she said.


By phone, Wellmark told Stuecker COBCO had three choices: It could find a new broker and administrator, it could retain Two Rivers Insurance as a consultant, or it could deal with Wellmark directly.


Stuecker said finding a new broker or dealing with Wellmark were not practical choices.


“This could not have happened at a worse time,” she said. “We are going through open enrollment, as we do every year.”


That process requires Two Rivers Insurance to meet with the 194 full-time Burlington employees over a four-day period, Stuecker said.


Stuecker asked Wellmark why Two Rivers Insurance was being terminated now, knowing about the timing.


“They said after speaking with the Iowa Insurance Division, they felt they had no choice but to terminate immediately,” she said.


Iowa insurance commissioner Nick Gerhart told the Register the state has just started its investigation.


“Wellmark said they would help, but understanding and administering the plan is a full-time job. We only had until Friday to make the choice,” Stuecker said.


Two Rivers Executive Vice President Todd Ackerman said Wellmark’s concerns with his company started last September after Wellmark canceled Mutual Med as an approved insurance wholesaler.


Two Rivers was required to buy Wellmark insurance through a wholesaler and chose Mutual Med. When Mutual Med was dismissed, Ackerman said his company tried at two meetings in September to convince Wellmark to allow it to buy directly.


Ackerman said the companies reviewed the billing procedures that were established with Mutual Med and approved by Wellmark for at least the three years of Ackerman’s tenure.


“I don’t think they had a full understanding that there are other portions that go into the premium. It is at the request of our customers that we customize our bill,” Ackerman said.


“Wellmark wants the Wellmark bill to be seen,” he said.


At another meeting in December, Ackerman said Wellmark reiterated its concerns with billings for the Iowa Governmental Health Care Plan.


Ferneau and Stuecker confirmed the controversy centers mostly on IGHCP.


“They are not looking at our trust (COBCO) at all,” Stuecker said. “We have received no request for records or a subpoena from the Iowa Insurance Division.”


At the end of January, Wellmark sent Two Rivers Insurance a letter, requesting documents.


“We supplied over 58,000 documents, and Wellmark received them March 21,” Ackerman said.


Before the documents were received, Wellmark sent Two Rivers Insurance a cease and desist letter.


“They wanted us to change how we were doing our consolidated billing, to show Wellmark separately, effective immediately,” Ackerman said.


Two Rivers changed its billing in time for the April bills, he said.


“We got no feedback on the new billing. On April 9, we got a termination notice from Wellmark,” Ackerman said. “We find it pretty perplexing. We were in the midst of talks, and they decided they wanted to end those talks.”


Ackerman acknowledged Two Rivers Insurance got a subpoena March 18 from the Iowa Insurance Division but didn’t think his company was doing anything wrong.


“The Iowa Insurance Division said several times this is a rate review versus an investigation,” he said. “I don’t know if that will change down the road.”


Ackerman didn’t know if Mutual Med was being investigated or if it has been issued a subpoena, too. Neither does he know if the timing between that company’s cancelation followed by Wellmark’s are related.


Meanwhile, he said Two Rivers “categorically disagrees” with the way Wellmark has framed the dispute


“We believe we were transparent,” he said.


He told the Register Two Rivers has helped the Iowa Governmental Health Care Plan save taxpayers millions of dollars in health care coverage costs.


“Every organization that has joined has entered the plan paying lower rates than on previous plans,” he said. “The lower rates, rate stability and higher level of service are all incentives for cities and counties to join.


“The average annual increase for the overall program has been 3.1 percent over the past nine years, which has helped all the firefighters, policemen and public employees that IGHCP provides coverage for.”


Wellmark controls more than 80 percent of the insurance market in Iowa for individual policyholders and more than 60 percent for small employers.


Besides Burlington, Two Rivers has offices in Davenport, West Des Moines and several other Iowa cities.


Reporter Jermaine Pigee and the Associated Press contributed to this report.

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