Iowa insurance agency pays $1.3 million to settle bill-padding allegations

An Iowa insurance brokerage has agreed to repay more than $1.3 million to local governments that it allegedly overcharged for health insurance.

Two Rivers Insurance Co., which is based in Burlington, was accused in 2014 of inflating the amount it spent on premiums for coverage purchased from Wellmark Blue Cross & Blue Shield. Wellmark, which is the state’s dominant health-insurance carrier, complained to state regulators that the brokerage had improperly included up to 7 percent in its own fees in “premium” costs that it billed to local governments for insurance for 10,500 public employees.

The brokerage denied wrongdoing, but the Iowa Insurance Division determined “Two Rivers engaged in unfair and deceptive acts and practices,” legal documents released Monday show. “Such representations had the capacity to mislead members into believing the presented amounts were entirely premium established by Wellmark and concealed the amounts of Two Rivers’ compensation,” the regulators wrote.

The settlement money is slated to go to 33 local government bodies, including cities, counties and school districts, that purchased Wellmark insurance for their employees via Two Rivers. The proposed payments range from $1,877 to Chickasaw County to $253,428 to the city of Council Bluffs. The government bodies could agree to the amounts or pursue their own, larger settlements.

Wellmark terminated its relationship with Two Rivers in 2014 after an audit uncovered the issue.

Insurance Commissioner Doug Ommen said brokers are required to be up-front with clients about their fees. “Any compensation apart from premium, any partial self-funding charges or any other producer or administrator fees or charges must be clearly disclosed so that these amounts and their purpose can be understood by insurance purchasers,” Ommen said in a prepared statement. “Our industry has been trending toward disclosure of all agent compensation to avoid even the appearance of a conflict of interest with the customer. We are pleased that Two Rivers made the decision to make changes when the issue arose and has now agreed to settle the investigation.”

Two Rivers President Todd Ackerman said Monday that the brokerage decided to settle the dispute despite continuing to deny wrongdoing. "Rather than prolong what would be an extremely costly and burdensome legal process, Two Rivers is pleased to conclude the review through this agreement," he wrote in a prepared statement. "While we still believe our past practices were appropriate at the time, we appreciate the efforts of Iowa Insurance Commissioner Doug Ommen to bring this matter to a resolution."

Besides its Burlington headquarters, the agency also has offices in Coralville, Earlham, Fort Madison, Mount Pleasant and West Des Moines.