To our producer community:

Highmark remains committed to our producers and to our mutual clients across all markets that we serve. The inaugural year of the Affordable Care Act (ACA) brought with it unprecedented challenges, growth and learning opportunities. Unfortunately, Highmark's unexpected enrollment gain in the Individual Market, which differentiated us as the owner of that market, came at a great cost. Here are some of the facts and downstream impacts:

• Enrollment-  In Pennsylvania, Highmark enrolled 165,189 individuals in on-exchange products alone, exceeding expectations in 2015.
• Utilization- These unprecedented enrollment numbers brought with them a number of extreme cases of adverse selection, including members who incurred more than $100,000 in claims and then canceled their coverage after only a few months. Additionally, many of Highmark's new individual customers were either uninsured or underinsured prior to joining Highmark.
• Reinsurance program reduction-  There was a reduction in the reinsurance program put in place through the ACA, combined with rapidly increasing spending on specialty drugs, which are becoming a larger proportion of pharmacy costs.  

Due to these unforeseen circumstances, Highmark has had to act quickly and make strategic decisions in this fluid marketplace. In order to remain competitive and recoup losses, we have reevaluated the market and have filed for appropriate rate increases for 2016.

Additionally, in the short term, we are taking a temporary course of action to not pay commissions or overrides on NEW 2015 SEP business submitted with effective dates from Aug. 1 through Dec. 31, 2015. Since this is short-term and only for SEP enrollment, this should have minimal impact on producers. 

Of course, commissions and override payments on enrollment with effective dates through July 31, 2015, will continue uninterrupted.  

This change will not impact payouts on:

• Current policies that remain in place through the end of 2015
• Future 2016 policies

Membership with effective dates from Aug. 1 through Dec. 31, 2015, will count toward contract counts for the Elite Agency incentive program.  

We appreciate your partnership and sincerely value the contribution of our producer community to the success of our business, and we apologize that the financial impact of this market's significant growth has brought us to this difficult decision. We hope that you, as our partners, understand the necessity of this temporary course of action and we appreciate your patience and continued support.  

Best regards,

Tony Benevento, Senior Vice President,

Pennsylvania Markets