Back in October, Anthem Blue Cross and Blue Shield of Maine, the state’s largest private insurer, sued 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.

On Wednesday, the Maine Superior Court affirmed the decision by state regulators to cut the increase, ruling that Maine law does not “expressly entitle insurers to a mandated profit margin“:

The judge also said it was not improper for the superintendent to consider the state of the economy and profits from Anthem’s other lines of insurance in making her decision on the proposed increase.

Insurance Superintendent Mila Kofman called the decision “good news for Maine consumers.’’ Attorney General Janet Mills said Anthem “cannot impose high rate increases on the backs of individual policyholders to maximize its corporate profits.’’

“In the past three years alone, Anthem turned over $200 million in dividends to its parent company Wellpoint, one of the largest health insurers in the country,’’ Mills said.

This ruling establishes a positive precedent for future lawsuits (which are almost inevitable given the new health care law’s rate review procedures) and the case in Massachusetts, where insurers are suing the state for using its rate review authority to reject “235 of 274 increases proposed by Massachusetts health insurers for small businesses and individuals.”

Currently, more than thirty states have the authority to regulate premiums in the individual or small group markets and Sen. Dianne Feinstein (D-CA) has proposed legislation to allow the federal government to review and reject insurance premium increases in states that don’t already have this authority. The industry is obviously resisting the effort.

A new Center on Medicare and Medicaid Services (CMS) analysis of the non-tax provisions in the new health care law has found that increased utilization by the 34 million newly insured Americans will raise total national expenditures by 0.9% between 2010 and 2019, outweighing the effects of the cost containment provisions in the law (the Medicare Commission, the excise tax, payment updates to Medicare). The report also doubts that providers will be able to “improve their own productivity to the degree achieved by the economy in large” and predicts that the payment updates may lead some Medicare providers “for whom Medicare constitutes a substantive portion of their business” to stop seeing Medicare patients.

The analysis is not without its positives, however:

- The law covers 34 million Americans.

- Overall out-of-pocket spending would decline by $237 billion from 2010-2019.

- It extends the life of the Medicare trust fundby 12 years.

- Public expenditures will actually decrease as a percentage of national health expenditures from 52% to 51%.

So what to make of these mixed results? First, the CMS report analyzes the first 10 years of reform, during which the rate of growth will increase as the uninsured are brought into the system. But after these first 10 years, it’s likely that the Medicare savings and the tax on high cost insurance plans will ultimately bring spending back down. Second, CMS, like the CBO, uses a narrow spectrum of evidence. For instance, the center does not score any savings from preventive care or system modernization (see Table 1 on pg. 23) and omits “any Federal savings pertaining to the excise tax on high-cost employer-sponsored health insurance coverage, the fees on insurance plans, the excise tax on devices, and other non-Medicare revenue provisions of the PPACA.” It also warns policymakers against interpreting the results too literally, since “the responses of individuals, employers, insurance companies, and Exchange administrators to the new coverage mandates, Exchange options, and insurance reforms could differ significantly from the assumptions underlying the estimates presented here.”

Indeed, there is a whole body of research that makes different assumptions and reaches different conclusions. In December, the Commonwealth Fund and the Center for American Progress Action Fund released a study that quantified the savings from the provisions that CMS largely ignores. Economists David Cutler, Karen Davis and Kristof Stremikis relied on business literature about the inefficiency in the health care sector, experiences of health practitioners, and the real world experiences of Geisinger Health System, Health Partners, Denver Health and others and estimated higher savings from modernization and payment reform. As a result, they found that the annual growth rate “in national health expenditures falls from 6.4 percent absent reform to 6.0 percent under the Senate proposal.” Similarly, the administration’s Council of Economic Advisers also released a report last year which found that health reform would reduce health care spending by 1 “percentage point over an extended horizon.”

Despite all this, conservatives are already using the new report to substantiate their criticism of the law. The House leadership blasted the analysis to reporters last night and today Rep. Paul Ryan (R-WI), House Minority Leader John Boehner (R-OH) and the House of Representatives Republican Conference all tweeted the analysis.

Their reaction represents a study in contrast. After the CBO found that health reform will lower the deficit, the GOP dismissed the findings by claiming that Democrats tricked the budget office with accounting gimmicks and funny numbers. The actual cost “over a decade is about $2.3 trillion on paper,” they claimed. “The far more likely deficits are $460 billion over the first 10 years, and $1.4 trillion over the next 10.” Now that the CMS produced a report which find that the law would marginally increase medical spending over the next decade, Republicans are clinging to the conclusion without questioning the methodology. But if the GOP’s initial claims are true, shouldn’t the cost increases be much higher?