(I am a blogger fellow with Brave New Films on their Sick For Profit campaign. Our new video on WellPoint is atSickForProfit.com.)
News outlets are starting to report on Anthem Blue Cross and Blue Shield, a subsidiary of WellPoint, suing the state of Maine to guarantee a 3% profit for themselves. Here's a report from the Maine Public Broadcasting Network:
The state and Maine's largest private insurer Anthem Blue Cross Blue Shield are locked in a legal battle over how much profit Anthem should be able to make. Earlier this year, Maine's insurance superintendent Mila Kofman denied Anthem's request to raise rates for its individual insurance products, calling it "excessive," and instead approved an increase that leaves Anthem without a profit margin for providing those 12,000 policies. Now Anthem has filed suit to get the decision overturned."Superintendent has noted that Anthem's done pretty well." Janet Mills is the Maine Attorney General who is representing the superintendent of insurance. Mills' office counters that Anthem averaged a 3.2 percent profit margin in its individual line of products for the nine years that the company has been in Maine. And that going a year without a profit from those products will not drain the company.
"She found that in fact that had contributed to $17.5 million and that its executives were pocketing rather large salaries and bonuses." Anthem spokesman Chris Dugan did not comment on the lawsuit beyond acknowledging that it had been filed. In a brief filed with the Maine Superior Court, however, Anthem calls a 0 percent profit margin unfair and unprecedented; it says it wants to have a profit margin of at least 3 percent.
Ed Schultz picked it up yesterday as well.
The new rates offered by the Maine Superintendent do not prevent Anthem from making a profit; they can do that the same way other companies might do so in a recession, by cutting overhead costs and lowering executive salaries and taking up more efficient management of their business. But as I've reported and as Igor Volsky confirms, Anthem wants the state of Maine to guarantee a 3% profit as a Constitutional right.
Why this matters in the extended entry.
? Maine is a "swing state" for health care reform - Given its Senators, and given this behavior by the insurer who controls over 70% of the local market, obviously a scandal like this in Maine, where Anthem is literally suing the state to guarantee a profit, is deeply embarrassing to the political class if it spreads and becomes a big story.
? Regulation alone cannot work - Here we have a state where insurance companies are regulated much like a public utility. The Superintendent is vested with the power to protect consumers and ensure reasonable rates. And despite that, the insurance company sues for a better profit margin. This is not entirely abnormal among utilities, who troll for a friendly judge to allow them to raise their rates. In the area of health care, however, we are being told that tough regulations will solve the problem of skyrocketing premiums and get everyone covered. I think we know what to expect - lawsuits like this in every state, with private corporations arguing that their corporate personhood status somehow entitles them to a profit - that's basically what they're saying in this lawsuit.
? The for-profit health care system is doomed - in this case, the Maine Superintendent of Insurance allowed Anthem to raise their rates by 10.9% to reach an actuarial "break-even" rate. Over the past ten years, they have raised their rates by double digits 8 times. If you had an individual plan in Maine in 1999, today it probably costsFOUR TIMES as much. That's just not sustainable for anybody. Before long, people will simply not be able to carry health insurance. And they will easily reach the hardship exemptions in the individual mandate in the Congressional bills. If you have to raise your prices by 11% every year just to break even, your business doesn't work. Increasingly, insurance companies are losing market share and only staying in business due to growth in Medicaid and Medicare. Government subsidization of this private industry, in other words, is keeping them alive. So why keep them afloat at all?
The Wonk Room has provided copies of the briefs in the case here and here. This is an important case to expose to understand insurance industry practices and the future of health reform.
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