WellPoint Sues Maine To Raise Premiums 18.5%By: dday Monday October 5, 2009 10:36 am
A wild story out of Maine.
Anthem Health Plans of Maine, a subsidiary of WellPoint, is suing the state because they want to increase premium rates by 18.5% on their 12,000 individual insurance policy holders, so they can guarantee themselves a 3% profit margin. This story shows how silly it would be to solely rely on regulation to rein in insurance industry practices.
Like many other states, Anthem Health Plans hold a monopoly on the individual insurance market in Maine, controlling 79% of all the plans. Also like many other states, they are licensed to sell insurance through the Department of Insurance, who must clear all rate increases prior to implementation. Originally, Anthem Health Plans were a nonprofit Blue Cross and Blue Shield corporation licensed to practice in Maine since 1939. In 1999, Anthem bought the business and began to operate it as a for-profit company. Since that point, Anthem has raised premium rates 10 times, and 8 of those times have been double-digit rate increases.
Jan-99: 20.4%
Nov-99: 15.7%
Jan-01: 23.5%
Feb-02: 12.7%
Jan-03: 3.4%
Mar-05: 14.5%
Mar-06: 16.3%
Jan-07: 16.7%
Jul-07: 1.3%
Jan-08: 12.5%
The average individual Maine rate-payer is paying four times as much for insurance than they did ten years ago.
But this isn't good enough for Anthem Health Plans. They first proposed a 14.5% rate increase for its individual insurance products, then they revised it up to 18.1% and finally 18.5%. This is an average increase. Some plans would see increase of 24.5%, some 38.4%, and for its Preventive Care and Supplemental Care Accident rider, which is part of 1/3 of all their policies, Anthem proposed a rate increase of 58.2%. This amounts to Maine consumers paying $12 million more in annual premium dollars for the exact same level of benefits.
Anthem isn't hurting for profit. Their Maine operations have generated an average annual return of $70 million dollars over the last five years. Anthem paid dividends to their parent company, WellPoint, of $75 million dollars last year alone, and $152 million since 2006. Their nine highest-paid employees totaled over $4.3 million in compensation. The individual market, while a smaller portion of their overall business, still generated $5.4 million in profit over the last two years.
The reason Anthem desires these rate raises is because their actuarial charts show they can guarantee a 3% profit through this increase. That's an estimate, however, and in 8 of the last 10 years the profit margin achieved has actually been higher. The Maine Superintendent of Insurance ruled in May 2009 that the 3% profit and risk margin sought was "excessive and unfairly discriminatory," as per the laws of the state, and instead approved a rate increase of 10.9% for Anthem. Given the recession, the financial health of the company, and the years of large rate increases, there was no way she could approve anything higher.
So Anthem sued the state. But not after filing revised rates at a 10.9% increase so they could get that going while they litigated for an even higher rate.
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