BANGOR, Maine — Anthem Blue Cross and Blue Shield of Maine is challenging a 2009 ruling by insurance Superintendent Mila Kofman that prohibited the company for one year from building profits into monthly premiums for the nongroup, individual insurance policies it sells.
The no-profit ruling was upheld in a Maine Superior Court appeal in 2009. Now, calling the case pivotal to defining the authority of insurance regulators, Anthem has brought its challenge to the Maine Supreme Judicial Court.
Attorneys representing the state insurance bureau and Anthem presented their arguments Wednesday at the Penobscot Judicial Center, while protesters outside denounced Anthem’s profit motive and praised Kofman for standing up to the industry.
In May 2009, after statewide public hearings, Kofman rejected Anthem’s individual policy rate increase request, citing, in part, the company’s “extreme financial health” during a time of widespread economic hardship. Although the company had booked losses in its individual coverage line in Maine, Kofman referenced the siz-able profits accumulating in the unregulated portions of its business when she denied the company’s requested 18.5 percent average rate increase and granted a lower increase of 11 percent.
By Maine law, the insurance superintendent is required to ensure that rate increases in the individual health insurance market are “neither inadequate, excessive or unfairly discriminatory.” The superintendent is obligated to consider both the interests of Maine consumers and the fiscal health of the insurance industry.
At issue is whether Kofman overstepped her regulatory authority when she disallowed the company’s built-in 3 percent profit for the fiscal year that began in July 2009, and instead imposed a zero-percent profit build-in for that year. That change was included in her reduction of Anthem’s proposed average rate increase.
In her questions to Assistant Attorney General Thomas Sturtevant, who represented the insurance bureau, Chief Justice Leigh Saufley suggested Kofman’s ruling failed to protect Anthem’s for-profit status. She said the ambiguous “neither inadequate, excessive or unfairly discriminatory” language of the law also might be inter-preted to mean “barely sufficient.”
“Anthem is a for-profit company,” she said. “If something is ‘barely sufficient’ in a profit environment, it must include profit, mustn’t it?”
“Not for one year, and not in a regulated environment,” Sturtevant answered.
Sturtevant said there is no statute in Maine insurance code that demands an insurer must receive a positive profit margin.
Representing Anthem, attorney Christopher Roach told the justices that company profits in an unregulated line cannot be used to restrict profits in a regulated line. Kofman’s referencing the “extreme good health” of Anthem’s overall operations indicates that she intended the company’s profitable and unregulated group insur-ance market to offset losses in the regulated individual market, he said, in violation of both state and constitutional law.
During a brief sidewalk press conference outside the courthouse, protesters criticized Anthem and praised Kofman for standing up to the insurance industry.
“Health care is a matter of life and death. It should not be a source of excessive profit for wealthy CEOs and stockholders,” said Ilze Petersons of the Peace and Justice Center of Eastern Maine. Petersons noted that Anthem’s parent company, Indiana-based Wellpoint, enjoyed record profits of $4.75 billion in 2009 and boosted the pay of CEO Angela Braley from $8.1 million in 2008 to $13.1 million in 2009.
If the Supreme Court overturns the lower court’s ruling, Anthem cannot recoup the money it might have made had zero-percent profit not been imposed. Since financial relief for the plaintiff, Anthem, is not possible, the Supreme Court may determine the case is moot, in which case the Superior Court’s decision would hold. If the high court does issue a new decision, it could rule in favor of Kofman’s interpretation of her regulatory authority, or it could rewrite that authority more narrowly.
A determination on the case is expected before the end of the year.