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Life Health > Health Insurance > Your Practice

NAIC "Standard Setting" Becomes an Issue in Maine

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The National Association of Insurance Commissioners represented itself as a “standard-setter” on insurance issues in a recent friend of the court brief to the Maine Supreme Court involving premiums charged for health insurance.

In a decision Feb. 28, the state Supreme Court upheld the authority of Mila Kofman, then Maine Insurance Superintendent, to order Anthem Health Plans, Inc., of Maine to lower the profit and risk margin it charges on individual policies from 3 percent to 1 percent.

Anthem last fall challenged the decision of Maine’s insurance regulator to ask Anthem to reduce the profit and risk margin. Maine officials supported the Insurance Department’s department argument that it was within its discretion to keep insurance premiums affordable.

The state’s Supreme Judicial Court said in its decision that Maine insurance officials “properly balanced the competing interests” in arriving at an approved rate increase of 5.2 percent for the second half of the 2011-2012 rate year. Anthem sought a rate increase of 9.2 percent.

The case is Anthem Health Plans of Maine, Inc. v. Superintendent of Insurance.

Anthem sued because it believed that the state’s action violated both the Maine and U.S. Constitutions.

Kofman based her decision on the fact that Anthem had been able to make strong dividend payments to its corporate parent between 2007 and 2010, yet increase its surplus by $30 million.

“Against the weight of Anthem’s individual product line profitability and Anthem’s company-wide success, the superintendent cited the sworn testimony of nearly 40 Anthem policyholders who indicated that Anthem’s average proposed rate increase would intensify their already difficult individual financial situations and threaten ‘their corresponding ability (or inability) to stay insured’.”

In its brief, filed Oct. 24, the NAIC said it had the right to participate because, “through the NAIC, state insurance regulators establish standards and best practices, conduct peer review and coordinate their regulatory oversight.”

The brief added that, “NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.”

The NAIC brief said that, “it is clear the superintendent acted within the scope of her discretion in determining the one-year rate increase she approved was not inadequate.”

The brief is important because styled itself as a “standard-setter” in a legal brief in October, before the NAIC staff secured the permission to style itself as such in late December.

At the same time, earlier this week a member of the House Financial Services sent a letter to the NAIC asking it to  explain the legal reasoning behind its decision to describe itself as a “standard-setting organization” rather than a trade group.

The decision to change its designation and to ask for approval of all commissioners was made soon after a public hearing on insurance modernization and regulation convened by the Treasury Department where several of those testifying referred to the NAIC as a “trade group,” which by its legal definition, it is.  


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