Anthem Health Plans of Maine, Inc. v. Superintendent of Insurance
40 A.3d 380, 2012 WL 621026, 2012 ME 21 (2012)
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Rule of Law:
The Superintendent of Insurance, when reviewing individual health insurance rates in Maine, is not statutorily required to guarantee a specific profit margin for insurers and may balance an insurer's financial integrity against the public interest in affordable premiums and the viability of the insurance pool, without violating constitutional prohibitions against confiscatory takings or cross-subsidization, so long as the approved rates allow the insurer to operate profitably.
Facts:
- Anthem Health Plans of Maine, Inc. provides both unregulated group health insurance products and regulated individual health insurance products in Maine.
- Rates for Anthem's individual health insurance products are regulated by the Superintendent of Insurance pursuant to 24-A M.R.S. §§ 2736 to 2736-C.
- On January 28, 2011, Anthem filed proposed revised rates for its individual health insurance products to become effective on July 1, 2011, which would have resulted in an average rate increase of 9.7% for nearly 11,000 policyholders.
- Anthem's initial rate proposal included a 3% targeted pre-tax profit and risk component for its individual health plans.
- Anthem later modified its proposed average rate increase to 9.2% and maintained that any approved rate should include at least a 3% risk and profit margin.
- From 1999 to 2010, Anthem's individual insurance product lines in Maine generated over $15.5 million in pre-tax operating gain, averaging 2.1% of total revenue, and contributed to a company-wide surplus that increased from $209.5 million in 2009 to $229.1 million in 2010.
- Nearly forty Anthem policyholders provided sworn testimony indicating that Anthem’s proposed 9.2% rate increase would intensify their already difficult individual financial situations and threaten their ability to stay insured.
- Anthem projected to earn a nearly $4,000,000 profit for the rate year 2011-2012 even with the 1% risk and profit margin approved by the Superintendent.
Procedural Posture:
- On January 28, 2011, Anthem filed proposed revised rates for its individual health insurance products with the Superintendent of Insurance for approval.
- Between March 14 and April 13, 2011, the Superintendent held five public hearings to consider Anthem's proposed rates, admitting testimony and submissions from Anthem, the Attorney General, and Consumers for Affordable Health Care.
- On May 12, 2011, the Superintendent issued a decision and order, determining that Anthem’s proposed 9.2% rate increase with a 3% risk and profit margin was excessive and unfairly discriminatory, and indicated that an average rate increase of 5.2% containing a 1% risk and profit margin would be approved.
- Immediately following that decision, Anthem submitted a revised filing intended to comply with the Superintendent's terms.
- On May 18, 2011, the Superintendent issued a subsequent order putting into effect the approved 5.2% rate increase and corresponding 1% built-in risk and profit margin.
- Anthem filed a petition for review of this final agency action in the Superior Court (Business and Consumer Docket) pursuant to M.R. Civ. P. 80C and 5 M.R.S. § 11002.
- On August 29, 2011, the Superior Court affirmed the Superintendent’s decision.
- Anthem filed a timely, expedited appeal to the Supreme Judicial Court of Maine.
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Issue:
Does the Superintendent of Insurance's approval of an individual health insurance rate increase that provides a 1% risk and profit margin, rather than the insurer's requested 3%, violate 24-A M.R.S. § 2736 or the United States and Maine Constitutions by denying the insurer an opportunity to earn a reasonable profit?
Opinions:
Majority - Jabar, J.
No, the Superintendent of Insurance's approval of an individual health insurance rate increase that provides a 1% risk and profit margin does not violate the statute or the state and federal constitutions by denying the insurer an opportunity to earn a reasonable profit. Justice Jabar reasoned that 24-A M.R.S. § 2736(2) does not explicitly require the Superintendent to consider or guarantee a specific profit margin for individual health insurance products, unlike other sections of the Maine Insurance Code governing different types of insurance (e.g., casualty, workers' compensation) which expressly mention "reasonable margin for underwriting profit." The term "inadequate" in § 2736(2) is ambiguous, and the Superintendent's interpretation, which protects an insurer's "financial integrity" rather than guaranteeing a specific profit, is reasonable and consistent with a majority of other jurisdictions. The Superintendent properly balanced the insurer's financial position (Anthem's overall profitability and prior profits from individual lines) against the public interest in affordable premiums and minimizing adverse selection, as required by the "not excessive, inadequate or unfairly discriminatory" standard. The court found no error in the Superintendent’s conclusion that the 3% built-in risk and profit margin Anthem initially proposed would have contributed to an "excessive" rate increase. The court concluded that there was no evidence of cross-subsidization or a confiscatory taking because Anthem's individual product line had historically generated profit and was projected to remain profitable even with the approved 1% profit margin, thus providing a reasonable return on investment.
Analysis:
This case clarifies the Superintendent of Insurance's broad discretion in regulating individual health insurance rates in Maine, emphasizing consumer protection and the financial integrity of the insurer rather than guaranteeing a specific profit margin. It establishes that the absence of explicit statutory language requiring consideration of "reasonable profit" for a specific insurance type grants the regulatory body greater flexibility. Future cases will likely cite this decision to support regulatory authority to set rates that ensure insurer solvency while prioritizing consumer affordability, even if it means approving lower profit margins than requested by insurers, provided the rates are not confiscatory. It reinforces the idea that an insurer's overall financial health, not just the profitability of a single product line, can be relevant in rate determinations when assessing "inadequacy."
