Can you set a reasonable profit for a health insurer? A state judge says the state insurance regulator sure can.
A Maine judge upheld a state regulator's rejection of an insurer's premium-rate hike, which would have raised the cost of plans purchased by individuals by 18.1 percent compared with the previous year.
And given the scrutiny health insurance premium hikes have been getting lately, the rest of the country is probably watching this development very closely.
Here's the judge's order, which was issued Wednesday.
Earlier in the year, Anthem Blue Cross and Blue Shield got permission from Maine regulators for a 10.9 percent increase, so the court battle was really over an additional 7.2-percentage-point proposal.
The insurer, said the 10.9-increase wasn't enough to make a profit and that the regulator's rejection of the extra increase was "confiscatory." Anthem also said it needed more money in the bank to brace for unanticipated cost increases.
In his decision, Maine Judge Thomas Humphrey relied on a 1953 Supreme Court ruling in a case brought by the now-defunct Baltimore & Ohio Railroad Company: "So long as a railroad is not caused by such regulations to lose money on its over-all business, it is hard to think that it could successfully charge that its property was being taken for public use 'without just compensation.'"
Anthem, a subsidiary of the massive insurance firm WellPoint, said it hadn't decided whether to appeal.
The regulator, Mila Kofman, called the decision "good news for Maine consumers."
How will consumers fare in other states where insurers and regulators are duking it out? The Wall Street Journal reminds readers that a similar court case is still playing out in Massachusetts, where regulators rejected 235 insurance plans' requests to raise rates. A couple weeks ago, a judge there blocked insurers' efforts to go through with the hikes, but no final decision has been reached.
The Journal also points out that state regulators in California and Colorado are scrutinizing rate hikes by WellPoint units in their states.
Hikes as high as 39 percent by California's WellPoint affiliate became a politically charged issue in the final weeks of the health overhaul debate, and some would argue even helped bring President Obama's health care push back from the dead.
As for WellPoint, it's been a bad PR year.
Just yesterday, Reuters revealed that the insurer has been kicking people off its rolls when a computer algorithm detects that they had been diagnosed with breast cancer. "The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators."
HHS Secretary Kathleen Sebelius fired off a letter to WellPoint CEO Angela Braly, noting that under the new health law, such practices will be illegal.
UPDATE: Late in the day, Braly sent a letter in response to Sebelius, saying the company does not single out women with breast cancer to cancel them and has done much to help prevent, detect and treat the disease. She is requesting a meeting with the Secretary to discuss the matter further.
Weaver is a reporter at Kaiser Health News, a nonprofit news service.