Health Care In The States

Maine’s Top Court Backs State Authority To Limit Health Plan’s Profits

By Julie Appleby

February 28th, 2012, 4:10 PM

In a case closely watched by the insurance industry, Maine’s top court Tuesday upheld state regulators’ authority to hold down rate increases sought by Anthem Health Plans of Maine.

In its ruling, the Supreme Judicial Court said that Maine’s insurance superintendent had “properly balanced the competing interests” in arriving at an approved rate increase of 5.2 percent. The insurer, a unit of Wellpoint, the nation’s largest insurer, had sought a 3 percent profit margin as part of an overall 9.2 percent increase in health insurance rates for policies sold to individuals in 2011. It argued that state regulators’ decision to grant a 1 percent profit margin violated state law and the U.S. Constitution by depriving the company of a “fair and reasonable return.”

Wellpoint spokeswoman Kristin Binns said in an e-mail statement that the company had not decided on its next step. “We stand by our position that filed rates need to both cover the medical costs for our members and allow for an adequate risk margin to cover unanticipated costs,” she said.

Legal experts say the company has several options, including asking the state court to reconsider its decision, or seeking to appeal the ruling to the U.S. Supreme Court.

Maine law, like that in many states, says premium increases cannot be excessive, inadequate or unfairly discriminatory. In October, the National Association of Insurance Commissioners filed a brief with Maine’s top court, saying that if the court sided with Anthem, the decision “has the potential to destabilize a key aspect of insurance regulation and will have far reaching effects impacting all states.”

Tuesday’s decision pleased Mila Kofman, Maine’s insurance superintendent at the time Anthem made the requests.

“This is great news for consumers because it reaffirms that a state insurance regulator, when they have the authority, can do a balanced, comprehensive review of rates,” Kofman, now a researcher at Georgetown University’s Health Policy Institute.

The rate increase decisions affected policies Anthem sold to individuals, who buy coverage because they don’t get insurance at work or school and don’t qualify for government-sponsored coverage.

The District of Columbia and 26 states, including Maryland and Virginia, have the authority to veto rates deemed excessive for at least some types of insurance, generally policies sold to individuals and small businesses. Seven states, including California, have the power to review rate increases in advance but not to block them.

In addition, the federal health care law requires states – or in some cases the federal government – to review health premium increases of 10 percent or more, although it does not give the federal government power to reject increases.

3 Responses to “Maine’s Top Court Backs State Authority To Limit Health Plan’s Profits”

  1. Maine needs to be careful what it wishes for. Anthem may well decide to pull out of the state completely leaving even less insurance choice for consumers. SInce when can the gov’t start setting what profit margin a company will make? Can Mainers spell COMMUNISM? Insurance carriers are companies in business to make a profit. When we take profit out of the picture so goes the private insurance industry. Look at the mess Medicare and Medicaid are in financially. Gov’t does not control costs better than private industry period.

  2. R Quinn says:

    A 3% profit margin is unreasonable, since when? Utilities are allowed higher profits. Regulators have no trouble forcing higher rates on citizens for electric and gas, but not insurance?

    This is pure politics focusing on the wrong problem. They should look at the profit margins of most other industries. We are heading down a slippery slope with this policy. Premiums are not health care costs, they are a reflection of true costs.

    Why not regulate college costs, the price of corn flakes or a Big Mac?

  3. Anne PME says:

    Competing interests: Equity in United Health helps pay for my Anthem Maine individual premiums. Anthem’s losses in court and on their balance sheet are and might continue to be a competitive and financial advantage for United Health and other insurers.

    I am one of the Anthem policy holders whose premiums have likely paid for this lawsuit. In Maine, there are very limited insurance options and Anthem had and continues to have dominant control over health insurance in Maine. When companies use outdated or failed profit models, the senior executives who made and oversaw these business failures should, at the very least, lose their bonuses. When these same executives continue to rely on a failed and outdated profit model, they should be terminated. In any other publicly held business that is not a monopoly and competes in a market, that is what would happen.

    As for Anthem pulling out of the state, given that the parent and subsidiaries oversee the federal employee plan and Medicare A, if they pull out, they might also endanger or even lose these and other very profitable accounts. In addition, should they continue to waste time and money it might endanger their license, and in turn, further endanger their stockholders.