A long-running dispute between Anthem Health Plans of Maine and the state Bureau of Insurance goes before Maine’s highest court today, and the outcome could affect health insurance premiums in Maine and beyond.

Anthem will argue that it has a right to build in a 3-percent profit and risk margin when setting individual health insurance premiums. The state will argue it has the authority to reduce the margin to keep insurance premiums down at a time when Mainers are struggling to pay for their coverage.

The outcome could directly affect fast-rising premiums for about 11,000 Mainers who buy coverage from Anthem because they don’t get insurance at work and don’t qualify for government-sponsored coverage. It also may affect future health insurance premiums in other states, where both insurers and regulators are watching the dispute.

Insurance superintendents in other parts of the country keep track of such decisions when trying to limit premium increases in their states, said Joseph Ditre, executive director of Consumer for Affordable Health Care. “Superintendents are looking for tools,” he said.

Although Maine’s Bureau of Insurance can’t dictate premiums for businesses and their workers, it can regulate rates for individual policyholders, some of whom pay $500 a month and have deductibles of $2,500 or more.

Former Maine Superintendent of Insurance Mila Kofman has reduced Anthem’s proposed profit and risk margin in its past three annual rate proposals, citing the inability of customers to keep up with the premium increases.

In May, Kofman rejected a proposed 9.7 percent increase and pared it to 5.2 percent. It effectively meant that those policyholders would pay about $3 million less than Anthem’s original request. Kofman’s decision included a reduction of the profit margin from 3 percent to 1 percent.

Anthem challenged the past two rate decisions in court and lost, but the latest appeal is the first one to reach the state’s highest court quickly enough for the seven-judge panel to hear the core arguments and render a final ruling.

Oral arguments are scheduled for this afternoon in the Penobscot Judicial Center in Bangor. It’s unknown how soon the court will issue a decision.

“We feel very strongly that a 3 percent margin is not an excessive one given this specific market,” said Chris Dugan, spokesman for Anthem.

Dugan said the individual market is especially hard to predict because it includes a limited pool of people, an increasing percentage of subscribers with chronic health issues and a state requirement that no one be turned away, among other things. Anthem is the only carrier now offering individual insurance coverage statewide.

Anthem makes a profit on individual plans in some years, and takes a loss in others. The company is arguing that the law entitles it to a reasonable profit and risk margin — 3 percent — so that it’s less likely to need profits from its other insurance plans to subsidize individual policyholders.

“Our strong contention is that each line of business needs to stand on its own,” Dugan said.

The Attorney General’s Office, which is representing the Bureau of Insurance, argues in its court filing that Anthem has made plenty of profit, both from the individual policies and its group insurance plans. Anthem earned $1.5 million last year and has earned $15.5 million since 2000 on its individual plans, the filing says. Companywide, Anthem’s surplus rose to $229 million in 2010, the state argues.

“The approved rates pose no risk to Anthem’s financial integrity,” the filing says.

No matter what the court decides, the Bureau of Insurance is expected to have a more limited oversight role in future years.

A Republican-backed health insurance reform law passed earlier this year allows insurance companies to avoid future state reviews if rate increases are less than 10 percent a year and they are using at least 80 percent of the premiums to pay claims. Anthem pays out about 88 percent of its individual policy premiums in claims.

The goal of the law is to encourage more competition, which would lead to lower premiums, said Dan Bernier, a lobbyist for the Maine Association of Health Underwriters.

“For a small carrier, this lengthy process for file and approve is a problem,” Bernier said. “Hopefully, we can get some smaller carriers into our market to compete with Anthem.”

Rep. Anne Graham, D-North Yarmouth, is hoping to overturn that part of the health reform law, at least until the state develops a competitive market.

“All I’m asking is that rates be reviewed by the superintendent of insurance,” she said. “There’s a real concern … that these individuals are going to be facing these rate increases and there’s no real competition.”

The Legislature’s Republican leadership rejected her effort to submit a bill, although Graham said she is meeting with key lawmakers and intends to appeal the decision.

 

Staff Writer John Richardson can be contacted at 791-6324 or at: [email protected]