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(I am a blogger fellow for Brave New Films on their Sick For Profit campaign. Follow us on Facebook.)
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.
The Superintendent of Insurance explained in a court filing that there is no statute mandating that Maine must provide Anthem or any other insurer with a guaranteed profit. Given Anthem’s ability as a large operation to cut costs, just as any family must do during a recession, the Superintendent argued there is nothing preventing them from making a profit with a 10.9% rate of premium increase. But Maine is under no obligation to guarantee one. That would be a "socialized profit," which Anthem is asserting the right to without any legal basis in fact. Furthermore, policyholders have contributed $17.4 million in profit to Anthem’s bottom line over the past decade, which should be more than enough to cover potential losses from just the individual insurance line this year.
Anthem argued that they were discriminated against relative to other companies in Maine because one other individual insurer was provided a 3% profit and risk margin (that company, MEGA, asked for 2.2% rate increase back in 2007, a far different scenario). This, the corporation said, violated their equal protection rights under the federal and state Constitutions. This is a laughable claim, that the state must guarantee a profit for every insurance company licensed to provide a product. It’s nowhere to be found in the Maine Insurance Code, and the Superintendent of Insurance is allowed under Maine law to consider each company’s situation individually. In this case, she ruled that a 18.5% increase in premiums would be unfair and excessive.
This is a very revealing case. Those arguing against a public option claim that insurance regulations alone will be sufficient to provide an affordable product for everyone. Here’s a case where Maine is attempting to regulate the industry, and the industry sues the state in an effort to grab more profit. While claiming to be on the side of reform, they will fight tooth and nail, and can be expected to do so for every regulation in the national health care bill, right down the line.
Brave New Films has put together a video exposing the practices of Anthem and its parent company WellPoint. You can send your friends in Maine the news about this lawsuit, to highlight this practice. Maine Superior Court will consider this case on Wednesday.
From Maine Superior Court, Civil Action, Docket No. AP-09-29
Anthem Health Plans of Maine, Inc., d/b/a Anthem Blue Cross and Blue Shield v. Superintendent of Insurance, et al.
Rate this story up on Digg and Reddit.
…Arthur Delaney now has this story up at The Huffington Post. He notes that Anthem lied about their individual market performance:
In its filing, Anthem said it had lost $3.7 million on its individual insurance products over the past five years. The AG says Anthem has made $5.4 million from individual consumers over the past two years, and points out that Anthem paid $75.7 million in dividends to WellPoint in 2008, $40.4 million in 2007, and $35.6 million in 2006. And its executives paid themselves pretty well, too.
38 Comments
Tremendous video, dday. Thanks for sharing. (And good to see you here!)
I’m sure that sensible centrist Evan Bayh will condemn this outrage.
Or not.
so.. what’s Senator Snowe planning on doing to protect her constituents from these practices? Would her fellow rethugs consider it un-American for state governments to defend themselves in court when their corporate masters demand that they role over?
Just wait until we get a public option, then they’ll sue the entire country!
Someone should present this case to their favorite Republican, then ask him if this is what Republicans mean when they say that “tort reform” will help with healthcare costs…
excellent video. Thank you!
Thank you for this.
I hope every one of Sen. Snowe’s constituents writes to her about this.
Cc to Grassley, Bauchus, Collins et al.
And Big Honking CC to Rahm.
Welcome DDay,
that they would file in May 09 just as the HCR battle was joined, clearly without a wit of concern regarding the optics, really says so much about their rapaciousness and their expectations as to how this debate will end
DDay I enjoy your work. Maybe Digby can visit here also. You are getting an FDL Recommend
A pretty common but utterly unscrupulous business practice — taking money from a subsidiary (regulated profits) and shipping them upstream to the owning company (unregulated).
It’s a win-win for Anthem and its parent, Wellpoint. Anthem looks lean, so it can ask for double-digit rate increases every year; Wellpoint hoovers up all the excess money to as to keep Anthem’s ‘on-the-books’ profits low enough for Maine’s regulations. And Wellpoint has no restrictions on its profits, so it can go hog wild.
This is also what happens when one state tries to regulate a national or international corporation — it loses. This is the direct result of a lack of strict federal regulation of these blood-sucking fiends.
this explains why congresscritters are so eager to offer “across the state lines” “competition”…they’ll just play games with the state regulators.
They definitely don’t get it, do they? Sounds like a company that needs to undergo RICO examination real fast.
This is a plea for a government bailout, whaddya bet?
Yep…by my calculation using the numbers above, apparently Anthem made at least $120m in profits in Maine during the last two years (adding the AG’s numbers plus the massive ‘dividends’ paid upstream to Wellpoint…).
This doesn’t even include the Executives’ bloated salaries & bonuses.
Companies that get a guaranteed profit margin earns more profits when they maximize costs. So don’t forget to add in those excess costs.
Does anyone ever stop and ask WHY health care costs have to increase 15% per year? Because that’s really the bottom line.
The rest is just a charade with Wellpoint, Anthem, health care providers, and the insurance commissioner all trying to make it look as if there is some logic being employed. I mean where does the number 10.9% come from? I’ll bet someone thought it sounded a bit betterthan 11%…
Yay! dday is here!
That was my line!
Welcome dday.
watertiger is upstairs at the Mothership!
Late Night: The Devolution Will Be Televised
It seems to me not hubris, but rather a series of acts of desperation on the part of a sinking ship. I’m confident their books will not bear close examination.
Tomorrow between 11 and 12 noon you can demonstrate outside of the Anthem Blue Cross offices.
In San Francisco
11:30 AM at 1 Market Street near Embarcadero Ctr.
Contact: Patrick, promano @ health-access.org or 707-853-3888
In Los Angeles
11:00 AM at 801 S. Figueroa
Contact: Angela, awoods @ health-access.org or 213-413-3587
In Sacramento
12 noon at 1121 L Street
Contact: Zak, zak @ sacramentolabor.org or 916-813-6658
In Santa Ana
11:30 AM at 3100 Lake Center Drive
Contact: Marisol, riveram @ seiulocal1877.org
In San Diego
12 noon at 3655 Nobel Drive, # 250
Contact: Sandra, diazs @ seiulocal1877.org
Ron and I will be there. Larue will be there.
hmmmm-mmmmmm. and those arguing for a public option claim that insurance regulations plus a small, crippled, hobbled by design Potemkin Option will prevent this sort of price gouging on the part of the insurance cartel, as they feast off of the profits from the new mandates. yeah, right!
‘pragmatic’ pwogs drive themselves to incoherence with this stuff – insurance companies are so eeevil with their multiple double-digit rate increases that we must mandate that everyone purchase policies from them!
because, they would never abuse this newly captive market because there would be regulations, see, regulations, thats right, that’ll scare ‘em straight, they will renounce their wicked ways . . .
Even Jane Hamsher recognizes that mandates without a PO would be politically bad for the beloved Democratic Party, but here’s a prediction: the American people can tell when they are being screwed, by being forced to by a crappy product, and the existence of some little Public Potemkin Village, where people who cannot afford the exorbitant rates the cartel is dictating will have their bills deducted from their taxes will not preclude anyone directing their ire at those responsible for the travesty, the Democrats, who control both Congress and the White House.
Nor will quibbles like “But it was the Blue-Dogs…” cut any ice – it was the Donkey Party that did it, and the Donkey will pay for it.
I think this article suggests that the only cure for them is to get them out of essential health care altogether. The people of the United States shouldn’t have to fool around with these folks anymore. We need HR 676 passed now. “Medicare for All!” “Everybody In, Nobody Out!”
i agree.
I double agree with “Medicare for All!” “Everybody in, Nobody Out”. The public option was always meant to be a diversion away from real reform. Jacob Hacker’s idea of free market competition was embraced by Edwards in the primaries. As a supporter, I still favored Medicare for All as did he. What he accomplished was making health care reform a major topic of the campaigns and moved Hilary a lot and Barack a little to the side of major reform. But it also kept Dennis Kucinich who was a strong single payer advocate out of the debate. It should have been a debate between incrementalism and real reform. It should have been a debate between health insurance reform and health care reform.
Now I wish I had spent my energy on movement politics and joined a Medicare for All group…but there really wasn’t one. There is now. It’s Physicians for a National Health Care Plan. The AFL-CIO just pledged support. So no more getting Jon Testers elected. I’m done with them. Time for a national strike and a convoy of trucks surrounding the Capitol.
the reason i think this is probably true (at the top levels of D party policy) is that many public option advocates (like hcan) have attempted to shut out single payer advocates from policy and political discussions (jason, to his credit, does frequently engage with commenters here — although his treatment of kip from pnhp was inexcusable) while at the same time co-opting the language of single payer. if it wasn’t meant to be a diversion, there would have been open discussions and debate from the bottom up instead of a top-down behind the scenes attempt to set the direction of progressive healthcare reform.
…. btw, montanamaven, many many thanks to you and ralphbon and letsgetitdone for your trip to dc in support of single payer and the mad as hell docs. your activism is a big inspiration to me and i bet to many others.
i am a big fan of pnhp which, btw has been around since the late ’80s! they and groups like cna (probably my favorite labor union) have been doing the hard work for years organizing on the ground. i first heard of pnhp when by accident i attended a talk given by a member (on single payer universal healthcare of course) in 2002. their long work is now paying off because word is spreading even with a virtual media blackout. it’s all real grass roots. not a $40 million k-street project (not matter how good intentioned hcan and friends are, they are not genuine grassroots)
Yes, and the millions in ad campaigns HCAN fritters away on non-critical targets across the aisle shows that they are kowtowing to the powers that be in the White House (i.e., the lobbyists).
wow, this is a blockbuster! thanks dday.
I guess Wellpoint forgot to lobby the state regulator? Or maybe those Mainers know how to take a stand?
dday, i left a comment on your post at digby’s. but since there was no reply there, i’ll repost it here too (w slight mod):
………
actually, there is also a progressive critique of a-public-option-in-a-multi-payer-system. that critique includes the understanding that a public option (especially a small one) can’t work without very strong regulation and enforcement. and since insurance company regulation is problematic, so is the public option.
the idea the a public option can “keep the insurance companies honest” is a neoliberal fallacy founded on the myth that “free market competition” always brings about good results. unfortunately, as in the case of health insurance, competition, especially poorly regulated competition, can result in a race to the bottom. this is because, among other things, health insurance companies compete on price by denying care and by skimming the healthiest customers.
see pnhp and cna for more on the progressive critique.
your phraseology is so much more kindly than mine.
lets see if either one is dignified with a response from public option advocates.
It’s true that the weak public option is a mythical creature. What we want is for the pols to promise something, and then it becomes their problem to fix it. Unfortunately the lobbyists have figured this out–and they won’t let Dems take ownership of the PO even in watered-down form.
The weak public option wasn’t the idea of single-payer or robust PO advocates. It was the idea of pols looking for a compromise that doesn’t exist.
That is a perfect example of the heads I win tails you lose deal these companies will expect, and might get if we are not careful. Thanks for pointing it out.
If we had more competition in health insurance markets, the public option would be less necessary. It is necessary now. Making insurance mandatory could even make things worse if we don’t get more competition or effective regulation.
I wish they would do something to encourage competition. Maybe they could give tax breaks for money made in markets where a company had less than half the market. They could pay for the tax cuts with equal increases in taxes on money health insurance companies make in markets where they have more than half the market.
That would still be a poor substitute for single payer, and not solve all or even most the problems. Still, it would not cost the taxpayer by raising the total amount of taxes.
I think many good points are presented here which reflects well on the fact that there is no need to cloud the simple and straightforward way of how insurance plans function. By extension it is clear why a public plan is optimal. In addition fallacies depicting the detrimental effects that an insurance plan is able to produce also fall by the wayside.
When the cost of a risk is too large to bear individually a group pools their money and payments to cover those costs are drawn from the pool as needed, in that way the cost is affordable. The manager of a plan has only one simple function which is to make those payments, that’s it. It couldn’t be simpler.
Now the overall costs of the services being covered will be some amount and premiums set accordingly. Ideally these cost can be brought down but ultimately they will be some actual amount.
The upshot is that making payments for services rendered is cheapest when the money goes for the service and more expensive when a portion goes to profit. The reason is that making a payment is just a simple transaction. Proponents that claim that there is an inherent value in letting companies compete for making these payments say that this allows for efficiency and innovation but what innovations in making these payments have come about?
It is also false that any insurance plan will fundamentally determine the nature of the service provided, in this health care. All an insurer does is to pay for the service. It is neither socialist or anything else, just a payer.
It is degradingly pathetic to be told that one can not have the option to have a public scheme making these payments but instead made to be stuck with a putrid myriad of every permutation except this one. Those imposing this ultimatum should be voted out. This includes senators and congressmen but most especially Obama. These people are simply wedded to the notion that people’s money should go into the hands of private companies.
Much has been accomplished in keeping the PO alive by exerting the ultimate pressure of having elected official lose their seat and this pressure has to continue, our very health and lives depend upon it.
My wife and I moved away from Maine in March of this year to escape the cost of living. Now in Florida we are split up because we can’t afford to be togeather because of Health Insurance. What do I do? Suck it up? This is why I fought in Vietnam and other conflicts? I’m getting tired and apathy has set in now………………?? Insurance companies are killing people and our country. Smile”
This is the Best Solution.
“I think this article suggests that the only cure for them is to get them out of essential health care altogether. The people of the United States shouldn’t have to fool around with these folks anymore. We need HR 676 passed now. “Medicare for All!” “Everybody In, Nobody Out!”
This video deserves a national airing ASAP. Followed by a board dialogue with Tony Benn, Stan Brock, Wendell Potter, Dr. Paul, PNHP…
Thank you for a wonderfully written and personal post.
amen!
AMA Competitive Health Insurance Study 2007 Maine: Market Share!
http://www.ama-assn.org/ama1/p….._52006.pdf
Corporate Servitude enabled by law! Nice Job Sen. Snowe, steal from the governed to secure servitude for corporations! Go to hell!
For profit and tax exempt health insurers have niched themselves similar to pro state rights segregationists, usurping federal constitutional laws and protections for individuals, under the color of state law. Now some in Congress want to move the game up to the federal level, as Jefferson forewarned, “Aristocrats usurping constitutional checks and balances in the lust for profit!” Put an end to this rape of America by corporations hellbent on servitude under the color of law by buying policy makers with money and leveraged influence!