In 2009, the insurer sought to increase premiums by more than 18 percent for policies sold to individuals, igniting a public outcry. A rate increase averaging 10.9 percent was eventually approved. State regulators approved premium increases averaging 14.1 percent in 2010 and 5.2 percent this year.
At issue is whether the rates approved by Maine regulators were “inadequate,” according to Anthem, which saw its built-in profit margin of 3 percent stripped to zero in 2009, 0.5 percent in 2010 and 1 percent this year.
On Monday, the National Association of Insurance Commissioners filed a brief with Maine’s top court, saying that many states have laws giving regulators similar authority to that in Maine. If the court sides with Anthem, the decision “has the potential to destabilize a key aspect of insurance regulation and will have far reaching effects impacting all states.”
Even though the case is in state court in Maine, if Anthem loses it could embolden regulators in other states, said John Reiss, a Philadelphia-based health care attorney who is not involved in the case. But if the company wins, regulators elsewhere might not want to risk a similar lawsuit.
Anthem, the largest seller of individual insurance in Maine, also sees national ramifications. The company is spreading the cost of the litigation to policyholders outside of Maine because the outcome could have “a big impact on the industry and not just Anthem,” William Whitmore, Anthem’s regional vice president of underwriting, testified during a hearing in April.
Many states have laws similar to those in Maine, the brief filed by the NAIC said. The District of Columbia and 26 states, including Maryland and Virginia, have the authority to veto rates deemed excessive for at least some types of insurance, generally policies sold to individuals and small businesses. Seven states, including California, have the power to review rate increases in advance but not to block them.
The federal health care law requires states — or in some cases the federal government — to review health premium increases of 10 percent or more, although it does not give the federal government power to reject increases.
Several states are increasing oversight of premium increases, even beyond the federal law’s requirements. New Mexico lawmakers, for example, this spring approved a law expanding regulators’ review of insurers’ finances to include how much they hold in surplus and reserves. Growing financial reserves were cited by Oregon regulators in July when they reduced a requested 22 percent increase by Regence BlueCross Blue Shield to 12.8 percent, even though that meant the insurer would lose money on policies sold to individuals.