HHS finds first unreasonable rate hike

An insurer in Philadelphia is in the line of fire after the Department of Health & Human Services (HHS) found its proposed rate increase "unreasonable."

Everence Insurance's plan to raise rates by 12 percent next year for 5,000 small business employees is excessive and isn't justified by what it expects to pay out in medical claims in the state, reports the Los Angeles Times.

HHS determined that, based on Everence's rate filing, the insurer used national data instead of available state data to determine its premium increase, which resulted in unreasonably high premiums, the angency said in Nov. 21 statement

"By shining a light on unjustified premium increases, we will hold health insurers accountable like never before," said HHS Secretary Kathleen Sebelius in announcing the agency's first federal rate review under the health reform law. HHS is now calling on Everence, a subsidiary of a ministry of the Mennonite Church, to "immediately rescind the rate, issue refunds to consumers or publicly explain their refusal to do so," said Steve Larsen, director of the HHS Center for Consumer Information and Insurance Oversight.

Everence, for its part, is standing by its rate increase. "We have no plans to make any changes," said spokeswoman Judy Martin Godshalk, although she said the insurer welcomes a discussion with HHS, notes the LA Times.

The insurance company said HHS used a one-year calculation to determine how much it should spend on medical services, but since it's a small insurer with widely variable annual spending, Everence calculates premiums based on two years' worth of claims data. Using that calculation, Everence said it spent nearly 82 percent of premium revenue on medical care in Pennsylvania, not the lower amount estimated by HHS, notes Kaiser Health News.

"The Everence experience indicates that a longer experience period reduces premium volatility, which works better for group clients," Dave Gautsche, Everence senior vice president of products and services said, adding that the 12 percent rate hike covers the increasing cost of medical services, according to LifeHealthPro.

To learn more:
- read the HHS press release
- see the Kaiser Health News article
- check out the Los Angeles Times article
- read the LifeHealthPro article

Related Articles:
Rate reviews to strengthen with $109M HHS grants
Can bad publicity lower premiums?
HHS hopes to pressure insurers into lowering rate hikes
Experts share regulatory strategies for justifying rate increases