Anthem requests rate hike in Maine

In 2009 the company sued the state for permitting an increase that only allowed it to break even on its individual business line.

By Emily Berry — Posted Jan. 25, 2010

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The WellPoint subsidiary in Maine has asked for a nearly 23% increase in premiums for its individual customers, to take effect in July, even as it awaits a court decision over whether the company has a right to make a profit on that line of business.

U.S. Rep. Chellie Pingree (D, Maine), was among the critics of the rate increase proposed by Anthem Health Plans of Maine, which operates a BlueCross BlueShield-affiliated plan and covers more than 11,000 people through non-group policies in Maine. She said "asking for a 23% rate increase for individual insurance in the middle of a recession is outrageous."

But Anthem said the increase was necessary because it was losing money on individual insurance, partly the result of not being able to perform medical underwriting to assess risk and set prices because Maine is a guaranteed-issue state.

Anthem spokesman Chris Dugan said the company can't borrow from other lines of business to cover its losses on individual business, if for no other reason than it would be unfair to ask other customers to subsidize coverage in another market. Instead, he argued, the individual market in Maine needs regulatory reform that would help keep premiums down by lowering the risk profile of the members.

"Our state has been unable to reform the individual market in a meaningful way," Dugan said, "The combination of guaranteed issue and community rating caused the insurance pool to shrink year over year, which creates a dynamic where healthier people drop coverage, premiums rise, then the premiums increase at a faster rate."

As of the American Medical Association's most recent market concentration report, Anthem held about 71% of the overall health insurance market in Maine. It is also one of few insurers to offer non-group coverage in the state.

In 2009, the company requested an 18.1% average rate increase in a filing with the state's insurance superintendent, who by law must ensure that rate increases are neither excessive nor inadequate. The filing had built in a 3% profit margin.

Insurance Superintendent Mila Kofman, in denying the increase, ruled that Anthem's actuarial projections were flawed, and said the 2009 proposed increase would be "excessive and discriminatory." She ultimately approved a 10.9% hike.

Anthem filed an appeal with the Maine Superior Court asking to be allowed a 3% profit margin, and in the meantime, put through the 10.9% average rate increase in July 2009. The company argued in its appeal that Kofman had approved a 3% profit margin in the past. Anthem claimed it was discriminatory to force the company to take a loss on its product. Even with rate increases that included a 3% profit target, Anthem said it lost money on its individual line of business in the state in 2005 and 2006.

In its appeal, the insurer argued that it was being forced to fund a "de facto individual high-risk pool" -- something other states pay for either with fees from insurers or taxpayer funds -- because its pool of non-group customers is increasingly made up of sick, high-cost individuals.

Anthem claims that if the most recent request is approved, the resulting premiums would not allow it to recoup any of the estimated $2.4 million it lost in 2009 but would allow for a 3% profit increase for 2011.

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