Anthem Blue Cross and Blue Shield of Maine, the state’s largest private insurer, is suing the state after Maine’s Superintendent of Insurance denied Anthem a rate increase that would have required Maine residents to pay an “additional $12 million in annual premiums for the same level of benefits.” Under Anthem’s proposed increases, the average policyholder would have had to spend “more than $13,000 in premium and deductibles, prior to becoming eligible to receive any health benefits under the policy.”
After reviewing Anthem’s annual rate increases for policies sold within the individual health insurance market, Maine rejected the company’s proposed rate increase of 18.9%, but allowed the company to “break-even” in its individual market division and increase “rates by just 10.9%.” According to court documents obtained by the Wonk Room, Anthem, a subsidiary of Wellpoint Inc., argued that beyond simply ‘breaking-even’, the government must guarantee the company a 3% profit:
A 0% risk and profit charge, by definition, builds in no cushion for any of the risk that Anthem BCBS takes on by selling Individual Insurance Products in Maine. In addition, with a 0% risk and profit charge under the Superintendent’s approved rates, Anthem BCBS will not be able to provide any contribution to the surplus of the Company…Anthem BCBS — a for-profit Company — cannot be required to operate its highly risky Individual Insurance Products essentially as a non-profit company that must offset losses generated by the Individual Insurance Products through its group insurance business in Maine.
There is no requirement “that the Superintendent must affirmatively provide for a profit and risk margin in rates at all times and under all circumstances,” the state concluded in its brief. “Anthem repeatedly asserts throughout its brief, as if to make true, that for individual insurance rates to be ‘adequate’…they must cover all expenses incurred by the carrier … plus affirmatively provide for a reasonable rate of return that results in a contribution to the surplus of the Company.” “There is simply no requirement” that “the Superintendent must affirmatively provide for a profit and risk margin in rates at all times and under all circumstances.”
Indeed, considering the company’s financial strength and profitability, the “ample evidence” of “extreme financial hardship of subscribers,” and the company’s dominance of the market place (Anthem controls approximately 78% of the market in Maine), the state chose to shield its residents from subsidizing the insurers’ profits. After all, individual plans represent only “about 6.5%” of Anthem’s total revenue from all operations and “for the nine years that Anthem has been in operation in Maine, the pre-tax operating gain — or profit — from its individual line of insurance in the State totaled approximately $17.4 million.” For the year that ended December 31, 2007, Anthem’s total revenue from all operations for the year, “was over $1 billion, and its net income…was over $100 million.”
In its brief, Anthem argued that the Superintendent’s “reliance on the comments of policyholders is improper.” “None of the witnesses who made sworn or unsworn statements professed to have an actuarial background and/or familiarity with the financial and actuarial analysis reflected in Anthem’s BCBS’s rate filing to determine whether the rates were designed to cover the costs of the products plus allow for a reasonable rate of return,” the company concluded.