FRANKLIN COUNTY, Tuesday, Nov. 22 – The U.S. Department of Health and Human Services said that Everence Insurance of Pennsylvania is charging small businesses unreasonably high premium increases according to the first federal rate review under the Affordable Care Act.
"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 Insurance is affiliated with the Mennonite Church and insures people locally.
Everence said in a statement 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.
In its review, HHS stated the rate increase was "unreasonable" because it projected the plan's loss ratio to be below the federal standard of 80 percent. However, the loss ratio calculated by HHS was based on a one-year experience period, Everence said.
The announcement by the U.S. Department of Health and Human Services marks the first of many reviews that HHS will perform in addition to insurance rate reviews already being done by states. Proposals to raise rates by 10 percent or more will be reviewed.
The HHS review has found that Everence's 12 percent rate increase for small businesses in Pennsylvania was excessive. After reviewing the rate, independent experts determined the choice of assumptions the company based its rate increase on reflected national data rather than reliable and available state data. These assumptions resulted in an unreasonably high premium in relation to the benefits provided.
"We have called on this insurer to immediately rescind the rate, issue refunds to consumers or publicly explain their refusal to do so," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare & Medicaid Services.
Companies can either reduce their rate hikes or post a justification on their website within 10 days of the rate review determinationHowever, neither federal nor Pennsylvania regulators have the power to require the insurer to reduce the unreasonable rate, according to Consumer Watchdog.
"Everence should reverse this unreasonable rate hike and refund the excess premiums to their customers, as federal regulators requested. But what if they don't? Pennsylvania consumers should not have to rely on the goodwill of an insurance company to protect them when rates are found to be too high. State regulators must have the power to require companies to reverse unreasonable rate hikes and issue rebates," said Carmen Balber, Washington DC director for Consumer Watchdog.