WellPoint loses Maine court bid to protect profit margin

Maine's insurance superintendent is not legally bound to guarantee that health insurers' rates are high enough to make the company a minimum profit, the state Supreme Court ruled Feb. 28.

It's unclear how that will affect insurers' rate-setting requests or the state's consideration of any premium increases. The rates in question in the Supreme Court case will remain in effect through June.

Under new health system reform rules, federal authorities will automatically review any rate increase requests above 10%. They may deem them unreasonable but cannot block them from taking effect. Approving or denying rate requests remains with officials in Maine and other states where the law grants insurance regulators that power.

In the case decided Feb. 28, Anthem of Maine, a subsidiary of WellPoint, challenged the decision by the state's former superintendent of insurance, Mila Kofman, to limit the company's rate increase that took effect July 1, 2011.

Anthem originally had asked for a 9.2% increase, which it estimated would allow the company a 3% margin. But Kofman approved a 5.2% increase, limiting Anthem's projected profit margin to 1%.

The court affirmed Kofman's decision. "There is no statutory requirement that the superintendent consider a profit margin, let alone that the approved rates include a reasonable profit," the ruling said.

Kofman, a Democratic appointee, returned to academia after resigning in May 2011, citing a difference in philosophy with Republican Gov. Paul LePage. She was still watching the case and welcomed the decision.

"The implications of the Maine Supreme Court decision are significant," she said in an e-mail. "The decision is great news for consumers in Maine and for consumers in other states. Many states have the same or similar rate standard -- rates cannot be excessive, inadequate or unfairly discriminatory. The standard is based on a [National Assn. of Insurance Commissioners] model. The decision reaffirmed that the state's insurance regulator can scrutinize rates to ensure that consumers are protected."

Anthem spokesman Chris Dugan said in a statement that the company is still "reviewing the court's decision and have not yet determined our next steps. That said, 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."

Very few insurers offer individual coverage in Maine. Anthem held about 55% of the market for health insurance in the state, according to the most recent American Medical Association market share report, published in 2011 based on enrollment figures from 2009.

Kofman was the first insurance commissioner to ask the U.S. Dept. of Health and Human Services for a temporary exception for the state's insurers to meet medical loss ratio minimums required under the Patient Protection and Affordable Care Act.

Anthem held 49% of the market for individual insurance as of September 2010, based on covering 18,297 people, according to the paperwork filed as part of that request.

Kofman said asking insurers in the individual market to meet the minimum 80% medical-loss ratio right away could drive them out of the state, leaving Mainers with few choices for insurance coverage. The request was granted, so insurers have until January 2014 to comply.

The case was a near-repeat of the dispute between Kofman and Anthem over its rate increase that took effect in July 2009. Anthem had requested an 18.9% increase, which Kofman ruled would have been "unfair and discriminatory." Instead, she approved a 10.9% increase, which, according to Anthem's calculations, would allow it only to break even.

By the time Anthem's appeal reached the state Supreme Court, the next year's rates were in effect and the court ruled the issue moot. When it came to its rate request for July 2011, Anthem asked for an expedited consideration by the court to avoid the problem.