PORTLAND — Anthem Blue Cross and Blue Shield asked a Superior Court judge Wednesday to overturn a state decision that limited some health insurance rates to a 10.9 percent increase.

Maine’s largest insurance carrier had requested an 18 percent increase for its individual policyholders starting July 1, 2009. Insurance Superintendent Mila Kofman rejected the request, saying Anthem could forgo its usual profit margin because the recession was causing financial hardship for many policyholders.

Anthem’s appeal could directly affect the premiums for about 20,000 Mainers who buy its individual polices because they can’t get health insurance through employers or government programs. The dispute over the insurance company’s profits has taken on broader political significance amid the debate over national health care reform.

In fact, Anthem’s recent proposal for a 23 percent increase for the year starting July 1, 2010, and double-digit increases proposed in California and other states, became a rallying point for supporters of reform. The state has not yet ruled on the 23 percent request.

The federal reform law passed this week is expected to give individual policyholders more bargaining power starting in 2014, but won’t affect rate decisions in the meantime.

A ruling in favor of Anthem on the current increase will likely send the decision back to Kofman for an adjustment.

The Maine Attorney General’s Office defended Kofman’s ruling, saying Anthem’s past profits enable it to withstand possible losses. The company argued that it is being treated differently from its competitors and that it should not be required to offer health coverage to individuals at a loss, even during a recession.

“The rates are now discriminatory and they do not meet the state requirement,” Christopher Roach, Anthem’s attorney, said Wednesday during oral arguments in Cumberland County Superior Court.

law, he said, Kofman cannot set rates that are inadequate or excessive. “The economy has nothing to do with the superintendent’s statutory responsibility,” Roach said.

The 3 percent margin that Anthem seeks in its appeal is intended to provide for a profit and a cushion to cover risk, or higher-than-expected claim costs, Roach said. “Break-even is not enough, (because it is) highly likely, if not certain, to result in losses,” he said.

A second private company, which offers more restrictive insurance plans, was granted the 3 percent profit margin, Roach said. “Anthem was singled out for discriminatory treatment,” he said.

Thomas Sturtevant, an assistant attorney general, said Anthem’s is a special case because it’s the only company offering comprehensive private coverage to individual policyholders.

“In Maine, there is no competition in the individual market,” Sturtevant said, and as rates rise, fewer people are able to afford Anthem’s coverage.

Kofman wanted to keep many more Mainers from being pushed out of the market at a time when people were losing jobs and losing income, Sturtevant said. “The superintendent made a difficult decision. She did not abuse her discretion,” he said.

Kofman was confident that Anthem could withstand any loss, he said. Anthem’s individual polices generated $17 million in profits from 2000 through 2008, and $5.5 million in the past two years, according to Sturtevant.

In written arguments, the Attorney General’s Office also said that Anthem’s overall insurance business in Maine generated $152 million in dividends for its owner, Wellpoint, from 2006 through 2008.

Roach argued that past profits, or profits in other parts of Anthem’s business, should not influence the superintendent’s rate decisions. He cited Kofman’s own testimony before the Legislature last year, when she warned that taking other profits into account could encourage carriers to withdraw from the individual market.

Roach also said that, despite ups and downs, the individual insurance business has lost about $6 million overall in the past five years. If the company had not built in a 3 percent margin, it would have lost money in four of the last five years, he said.

Anthem spokesman Christopher Dugan said after the hearing that rising medical costs and regulations in the market, not profits, are driving double-digit rate increases. “What we’re seeing in these rates really is a reflection of the market,” he said.

Greg Howard, spokesman for Maine Change That Works, said Anthem is basically arguing for a guaranteed profit, no matter what is happening in the economy. “It’s a one-way street, that’s the bottom line,” he said.

Justice Thomas Humphrey said he will consider the arguments, but did not indicate when he will issue a decision.

 

Staff Writer John Richardson can be contacted at 791-6324 or at:

jrichardson@pressherald.com