• Anthem Health Plans of Maine, Inc. v. Superintendent of Insurance
  • April 9, 2012 | Authors: Justin Gundlach; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • Maine law requires the review of individual health coverage premium increases by the Superintendent of Insurance, though not of group coverage premium increases. Last year, the Maine Supreme Court dismissed as moot a challenge from insurers who sought rate increases on premiums for individual coverage. This year, the court again upheld the Superintendent's decision, but this time reached the substantive arguments made against the Superintendent's decision by Anthem Health Plans of Maine ("Anthem").

    Maine's Superintendent of Insurance reviewed and rejected Anthem's proposed annual premium increase of 9.2%, which would provide for a 3% profit margin, deciding instead on a 5.2% increase and providing for a 1% profit margin. Anthem challenged this decision, and when the decision was upheld by a Maine district court filed an expedited appeal with Maine's Supreme Court, which reviewed the lower court's decision for abuse of discretion.

    The parties disputed whether the Superintendent's decision went beyond the boundaries established by Maine's insurance code, which directs that the Superintendent may approve an annual increase in premiums for individual coverage so long as the increase is between the statutory ceiling ("excessive") and floor ("inadequate"). Anthem did not challenge the Superintendent's interpretation of "excessive," but contended that "inadequate" should - contrary to the Superintendent's interpretation - be read as an industry term of art that means providing a "fair and reasonable rate of return," i.e., a return comparable to the industry-wide average. The court observed that the term was ambiguous and also that the court owed "great deference to the Superintendent's interpretation unless the statute plainly compels a contrary result." On this basis, the court accepted the Superintendent's suggestion that an "inadequate" increase is one that would threaten an insurer's solvency or threaten competition (by permitting one insurer to drive others out of business by undercutting their prices in the short-term).

    In addition to finding that the Superintendent's interpretation was reasonable and so deserving of deference, the court also observed that Maine's insurance code expressly requires consideration of an insurer's reasonable profits for other insurance products, and expressly removes that factor from the list of what must be considered when reviewing proposed changes to premiums for individual health coverage.