PORTLAND, Maine — State regulators were justified last May in denying a planned rate hike by Anthem Health Plans of Maine, the state’s highest court ruled Tuesday.
The Maine Supreme Judicial Court sided unanimously with former Bureau of Insurance Superintendent Mila Kofman’s decision to slash by nearly half a rate increase affecting about 11,000 Mainers covered by Anthem’s individual health insurance policies. The rates took effect July 1, 2011, and run through June 30.
Anthem’s appeal marked the third time in three years that the firm, which provides the largest number of individual policies in the state, has appealed Kofman’s rate decisions. Justices have ruled in her and the state’s favor each time.
On Tuesday, the court ruled Kofman reasonably determined that Anthem’s proposed rate increase of 9.2 percent was “excessive.” Kofman set the average increase at 5.2 percent and limited the firm to a 1 percent profit margin.
Anthem originally sought a 9.7 percent increase before amending its request down.
“We are in the process of reviewing the court’s decision and have not yet determined our next steps,” Scott Larrivee, a spokesman for Anthem Blue Cross and Blue Shield, said in a statement. “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.”
Kofman resigned as superintendent at the end of last May, shortly after issuing the Anthem ruling.
In her decision, Kofman found that Anthem’s proposed increase would have resulted in built-in profits of close to $2 million in the individual market alone. Her decision cut the profit margin to about $600,000.
Anthem has argued that the lower rate increase prevented the company from earning a reasonable profit on its line of individual health plans in Maine. It sought a 3 percent profit margin, consistent with the industry average, said the insurer, which saw its margin chopped to zero in 2009 and to half a percent in 2010.
The justices disagreed. Maine law doesn’t require the superintendent to consider how rate changes affect health insurers’ profit margins, let alone account for a “reasonable” margin, their opinion states.
Anthem appealed to the state supreme court after Superior Court Justice Thomas Humphrey upheld Kofman’s decision.
“It’s a tremendous victory for consumers and for the regulators, whose decisions saved Maine consumers, at least Anthem consumers, $3 million,” said Joe Ditre, director of the advocacy group Consumers for Affordable Health Care, which has opposed Anthem’s appeal in court.
Anthem couldn’t support its claim that the lower rate increase would force it to charge its business customers more to make up for losses from its individual plans, he said, citing the justices’ opinion.
“What Anthem was trying to do was scare its other customers,” he said.
Anthem’s latest appeal could mark the last time it heads to court over its rate increases in Maine. Last year, the Legislature passed a health care reform law that calls for the superintendent’s approval of proposed rate hikes only if they top 10 percent.
Correction: An early version of this story incorrectly stated the Anthem’s market position. Anthem provides the largest number of individual health policies in Maine, but it is not the only provider of individual policies.