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Everence responds on rate increase in Pennsylvania

Based on HHS statement about small-business plan

GOSHEN, IND. – Everence responded today to the review by the U.S. Department of Health and Human Services of its rate increase for the Everence Insurance Co.’s ShareNet employer groups in Pennsylvania.

Difference indicated between two- and one-year experience period

Everence announced 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.

Loss ratio history for state and nationally

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 of the Everence ShareNet plan. “Essentially, our national experience and Pennsylvania state experience are the same for the two-year experience period,” said Dave Gautsche, Everence senior vice president of products and services.

Based on medical-cost fluctuations that the ShareNet Plan experiences in Pennsylvania from year to year, Everence based the rate increase on claims experience over a two-year period. As a small insurer with years of experience rating small groups, Everence does not use the one-year measure of claims experience to set rates. The one-year basis often results in wider swings in rate changes under the ShareNet plan. For instance, for the past three calendar years, actual loss ratios have varied by over 25%, 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,” said Gautsche. “We’d welcome the opportunity to have a conversation with HHS officials about how we determine our rates.”

Federal law doesn’t require a change in the rate increase based on the HHS statement. Everence implemented this health insurance rate change effective Oct. 1, 2011. The ShareNet premiums in Pennsylvania will have an average rate increase of 12.6 percent for groups renewing their plans Oct. 1, 2011, and gradually moves down to an average rate increase of 11 percent by July 1, 2012. The rate increase allows Everence to cover the increasing cost of medical services for its members.

*A loss ratio is the percentage of premiums that are used to cover health expense claims.

Nov. 21, 2011