HHS Chastises Insurer for Rate Increase

The U.S. Department of Health and Human Services (HHS) has issued its first rebuke to an insurer under the federal rate review provision of the Affordable Care Act.

HHS says a 12 percent premium increase by Everence Insurance of Pennsylvania on its ShareNet employer group customers is “unreasonably high” and asked the insurer to rescind the hike. HHS says insurers can either reduce their rate hikes or post a justification on their website within 10 days of the rate review determination.

“We hope that by publicizing the excessive premium hikes, we will empower consumers,” HHS Secretary Kathleen Sebelius said. “By shining a light on unjustified premium increases, we will hold health insurers accountable like never before, and help keep money in the pockets of Americans.”

Everence countered that it calculated its ShareNet rates in Pennsylvania based on a two-year experience period which results in a projected loss ratio that is comfortably above the federal standard of 80 percent. By contrast, HHS based its findings on a one-year experience period, Everence maintains. Moreover, the loss ratio history for the Everence plan in Pennsylvania has been 81.6 percent over the two-year experience period used for rating, which is approximately equivalent to the national loss ratio, notes Dave Gautsche, Everence SVP of products and services. “Essentially, our national experience and Pennsylvania state experience are the same for the two-year experience period,” he said in a statement.

Gautsche said the company uses claims experience over a two-year period to set rates because of the rapid fluctuations that can occur in one-year periods, noting actual loss ratios have varied by over 25 percent over the past three calendar years, with one year being nearly 100 percent. “The Everence experience indicates that a longer experience period reduces premium volatility, which works better for group clients. We’d welcome the opportunity to have a conversation with HHS officials about how we determine our rates.”