Anthem 'excessive' rate hike lawsuit heads to state Supreme Court

Insurance companies should keep a close eye on a case involving Anthem Health Plans of Maine, which sued the state because it says regulators violated state law and the U.S. Constitution when they refused to grant the 9.7 percent rate increase it requested.

Instead, Maine's insurance superintendent approved a 5.2 percent increase, finding that a higher rate hike was "excessive" and "unfairly discriminatory." The lower rate increase gives Anthem a profit margin of 1 percent instead of 3 percent, thereby eliminating its opportunity to earn a "fair and reasonable" rate of return, reports the Maine Public Broadcasting Network.

"As this case unfolds, it may have ramifications for how healthcare is viewed across the country," because it demonstrates that escalating insurance costs are driven by hospital charges, prescription drug costs, and new technology, Robert Zirkelbach, a spokesman for America's Health Insurance Plans, told MPBN.

"It's simply not viable for a health plan to continue providing coverage when it's paying out more claims than it's receiving in premiums, and that's the same for Maine as it is for any other state," Zirkelbach added.

Maine law says premium hikes cannot be excessive, inadequate, or unfairly discriminatory, and the case hinges upon Anthem's argument that the term "inadequate" is meant to protect insurers by allowing a "fair rate of return," according to a Washington Post/Kaiser Health News article.

However, regulators maintained the "inadequate" term isn't intended to safeguard insurers' profits, but to protect policyholders from rates so low that the insurer might not be able to pay its bills. They also alleged that Anthem has earned more than $15 million in pre-tax profits from Maine policyholders during the past 12 years which, in addition to double-digit premium hikes and $229 million in financial reserves, led to their decision that Anthem's rate increase was excessive. A lower court judge agreed, upholding the regulators' interpretation of the state law in August, notes the Post.

Anthem spokesman Chris Dugan clarified that the insurer isn't suing the state for a guaranteed profit. "We are simply exercising our administrative appeal rights to have the case reviewed by the Court to offer an opinion on whether or not the superintendent has the latitude to disallow a carrier a fair and reasonable rate of return," he said.

Oral arguments before the Maine Supreme Court will begin Nov. 10.

To learn more:
- read the Washington Post/Kaiser Health News article
- check out the Maine Public Broadcasting Network article

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