NU Online News Service, April 25, 2003, 12:19 p.m. EDT – A Florida state appeals court in Tallahassee, Fla., has ruled 3-0 in favor of efforts by American Medical Security Group Inc., Green Bay, Wis., to continue to do business in Florida.
Florida insurance regulators have been trying since July 2002 to suspend American Medical’s license to operate in the state for one year.
The Florida 1st District Court of Appeal stayed the regulators’ suspension order while American Medical appealed the order.
The appeals court now has reversed the suspension order and reaffirmed an administration law judge opinion that found that American Medical had violated no Florida laws.
Judge James Wolf, in an opinion for the three-judge appeals court panel, contends that the Florida laws governing health insurance pricing are too ambiguous to prohibit out-of-state group health insurers from taking claims history and other factors into account when setting prices.
“The decision supports our firm belief that we are and have been operating lawfully in Florida and everywhere we do business,” Samuel Miller, chairman of American Medical, says in a statement about the new ruling.
“Florida is an important market for us,” Miller adds. “The court’s opinion should serve as validation for our customers and agents of our continuing viability and vitality in that state.”
In 2001, Florida regulators accused American Medical, which sells health insurance to individuals, families and small groups, of violating Florida’s health insurance pricing rules by using a “tier pricing” system. The system divided consumers into large groups based on health status and offered lower prices to consumers in the healthier tiers.
Lawyers also filed a class-action suit on behalf of American Medical policyholders that makes allegations similar to those made by the Florida regulators.
The appeals court ruling will have no direct effect on the class-action suit, American Medical says.
American Medical said in July 2002 that it believed it had been complying with Florida pricing laws, and that Florida regulators had rebuffed its efforts to negotiate a compromise.
The company announced at the time that it was voluntarily switching to a block rating system in Florida to address the regulators’ concerns.
Underwriters who use a block rating system take the health of an entire block of customers into account when setting rates. The underwriters cannot increase rates for sicker members of the block, but they cannot lower rates for healthier members.
Supporters of block rating say that approach helps keep health insurance affordable for older consumers and consumers with health problems, but critics say it makes health insurance too expensive for young, healthy consumers.
The court’s opinion is available at http://www.1dca.org/opinion/opinions2003/4-23-03/02-2980.pdf