Kaiser Health News had an interesting article about Maine’s attempt to control health care costs by limiting the amount an insurance company can profit from being a middle man in the health care industry.

A lawsuit brought by a Maine unit of WellPoint – one of the nation’s largest health plans. Anthem Health Plans of Maine argues that regulators violated state law and the U.S. Constitution when they reduced requested premium increases in each of the past three years, depriving the company of "a fair and reasonable return."  How do you determine what is a fair and reasonable profit?  The insurance industy is challenging the authority to determine what is fair and reasonable.

The main issue is whether the rates approved by Maine regulators were "inadequate."   Maine regulators and the attorney general say that state law and the Constitution allow them to ensure consumers are not overcharged by a financially healthy company. Anthem, they said, was strong financially and wouldn’t be harmed by a smaller profit margin.

Many states have laws similar to those in Maine. The District of Columbia and 26 states have the authority to veto rates deemed excessive for some types of insurance, generally policies sold to individuals and small businesses.  

Several states are increasing oversight of premium increases.  In New Mexico, lawmakers approved a law expanding regulators’ review of insurers’ finances to include how much they hold in surplus and reserves. Growing financial reserves were cited by Oregon regulators in July when they reduced a requested 22 percent increase by Regence BlueCross Blue Shield to 12.8 percent, even though that meant the insurer would lose money on policies sold to individuals.


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