Regional health insurer gets federal rebuke

Everence defends premium increase

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A health insurer with a presence in Pennsylvania is the first to receive a federal reprimand for what officials term "unreasonably high premium increases."

Everence Insurance, affiliated with the Mennonite Church, received a letter Monday from the U.S. Department of Health and Human Services scolding the company for a 12 percent rate increase for its small business clients that went into effect Oct. 1.

The company's corporate headquarters is in Goshen, Ind., but it has multiple offices in Pennsylvania, including in Scottdale, Westmoreland County, and Mechanicsburg, Cumberland County,

"We're calling on the insurance company to immediately withdraw this rate and provide refunds or credits to any beneficiaries who have already paid the unreasonable amount," said HHS Secretary Kathleen Sebelius in a telephone media briefing.

The problem with the increase, Mrs. Sebelius said, is that the company used national data, rather than Pennsylvania data, to set its rate. "When the state data was applied, the rate was found to be excessive."

In a release late Monday, Everence officials questioned the HHS finding, saying the company's rate hike was based on claims made over a two-year period but the HHS calculation was based on a one-year experience period.

They said the company's average rate increase is 12.6 percent, which gradually goes down to an 11 percent increase on July 1. "The rate increase allows Everence to cover the increasing cost of medical services for its members," the company's release stated.

Everence insures about 5,000 people in Pennsylvania.

Although HHS cannot force Everence to reduce its rates, the insurer will have to explain the reasons for the increase on its website within 10 days if it doesn't.

This marks the first time Health and Human Services has taken an insurer to task for high premiums under the Patient Protection and Affordable Care health reform act passed last year, which requires average rate hikes of 10 percent or more be reviewed, by either state or federal officials, with the findings made public "so that consumers know exactly why they're paying more," Mrs. Sebelius said.

"This action sends a message to insurers around the country that the days of unfair double-digit rates increases are over."

The law also requires insurers to spend 80 to 85 percent of the money they receive from premiums toward providing or improving patient care. Everence officials say they have spent 81.6 percent of their premium dollars in Pennsylvania for health expense claims over two years.

Mrs. Sebelius said as insurers file rate information it will be posted online at, where the public can find rate increase information for their state or see basic profile information on their insurance company.

Monday's action on Everence's rate hike, Mrs. Sebelius said, "is the first of many we will be issuing over the coming months and years."

Steve Twedt: or 412-263-1963.


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