Title: Anthem Health Plans of Me., Inc. v. Superintendent of Ins.

State: maine

Issuer: Maine Supreme Court

Document:

MAINE SUPREME JUDICIAL COURT 
 
 
     
    Reporter of Decisions 
Decision: 
2012 ME 21 
Docket: 
BCD-11-439 
Argued: 
November 8, 2011 
Decided: 
February 28, 2012 
 
Panel: 
SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, 
JJ. 
 
 
ANTHEM HEALTH PLANS OF MAINE, INC.,  
 
v. 
 
SUPERINTENDENT OF INSURANCE et al. 
 
JABAR, J. 
[¶1]  Anthem Health Plans of Maine, Inc., d/b/a Anthem Blue Cross and 
Blue Shield (Anthem), appeals from the judgment entered in the Business and 
Consumer Docket (Humphrey, C.J.) pursuant to M.R. Civ. P. 80C affirming a 
decision by the Superintendent of Insurance (1) determining that Anthem’s 
proposed rate increase for its individual health insurance products—an increase of 
9.2% that contained a built-in risk and profit margin of 3% for those products—
was excessive and unfairly discriminatory; and (2) indicating that an average rate 
increase of 5.2%, containing a built-in risk and profit margin of 1% for the period 
from July 1, 2011 through June 30, 2012, would be approved.  Anthem contends 
that the Superintendent’s decision violates 24-A M.R.S. § 2736 (2011) and the 
United States and Maine Constitutions because the approved rate increase 
 
2 
eliminates Anthem’s opportunity to earn a reasonable profit on its line of 
individual health insurance products in Maine.  We disagree and affirm. 
I.  BACKGROUND 
[¶2]  In this expedited appeal, Anthem appeals from the judgment affirming 
a decision of the Superintendent of Insurance (Superintendent) regarding the rates 
approved for the rate period between July 1, 2011, and June 30, 2012. 
 
[¶3]  The facts are not in dispute.  In Maine, the rates for Anthem’s group 
health insurance products are unregulated and subject to market forces, while rates 
for Anthem’s individual health insurance products are regulated pursuant to 
24-A M.R.S. §§ 2736 to 2736-C (2011).  Section 2736(1) provides that “[e]very 
insurer shall file for approval by the superintendent every rate, rating formula, 
classification of risks and every modification of any formula or classification that 
it proposes to use in connection with individual health insurance policies . . . .”1  
The Superintendent is vested with the authority “to determine whether such filing 
meets the requirements that rates not be excessive, inadequate or unfairly 
discriminatory.”  Id. § 2736(2).2 
                                         
1  Insurance carriers who provide individual health insurance products in Maine are required to review 
and adjust rates annually by submitting information on proposed rate revisions to the Superintendent.  
6 C.M.R. 02 31 940-2 § 6(D) (2010). 
 
2  If the Superintendent “has reason to believe that a filing does not meet the requirements that rates 
not be excessive, inadequate or unfairly discriminatory,” the Superintendent must hold a hearing at 
 
 
3 
 
[¶4]  On January 28, 2011, Anthem filed proposed revised rates for the 
company’s individual health insurance products—HealthChoice, HealthChoice 
HDHP, HealthChoice Standard and Basic, HMO Standard and Basic, and 
Lumenos Consumer Directed Health Plan—to become effective on July 1, 2011.  
Anthem’s initial rate proposal for its line of individual health plans would have 
resulted in an average rate increase of 9.7% for nearly 11,000 Anthem 
policyholders.  Anthem built into its proposed 2011 rates a “3% . . . targeted 
pre-tax profit and risk component . . . solely in recognition of the Superintendent’s 
prior orders.”  On February 7, 2011, March 2, 2011, and March 31, 2011, Anthem 
filed revisions to the initial filing to correct errors and to provide the 
Superintendent with additional data and information.  By the time of the hearing, 
Anthem had modified its proposed average rate increase to 9.2% and included in 
the various revised submissions a requested risk and profit margin that fluctuated 
between 2.3% and 2.5%.  However, Anthem maintains in this appeal that any 
approved rate should include at least a 3% risk and profit margin. 
[¶5]  Between March 14 and April 13, 2011, the Superintendent held five 
public hearings where she admitted into evidence the sworn testimony of public 
                                                                                                                                  
which it is the insurer’s burden to prove that the proposed rates “are not excessive, inadequate or unfairly 
discriminatory.”  24-A M.R.S. § 2736-A (2011). 
 
4 
commenters and the submissions of Anthem, the Attorney General, and 
party-in-interest Consumers for Affordable Health Care (Consumers). 
 
[¶6]  The Superintendent issued the decision and order that is the subject of 
this appeal on May 12, 2011.  Critical to our analysis, the Superintendent 
interpreted the statutory mandate of 24-A M.R.S. § 2736(2) as requiring a 
balancing between a rate that would not threaten the “financial integrity” of 
insurers and “the legitimate government interests of protecting the viability of the 
insurance pool, keeping insurance premiums as reasonable as possible, and 
minimizing adverse selection.” 
[¶7]  In applying her interpretation of the requirement that the rates not be 
“inadequate,” the Superintendent noted that from 1999 to 2010 Anthem’s 
individual insurance product lines in Maine resulted in a “pre-tax operating 
gain . . . [of] over $15.5 million and averaged 2.1% of total revenue.”  The 
Superintendent recognized, consistent with the testimony of Anthem’s 
representatives, that the profits from Anthem’s line of individual insurance 
products were integrated into a “consolidated, company-wide surplus [that] is 
available both to meet all financial obligations of the corporation, including all 
insurance claims from all lines of business, and to pay shareholder dividends to 
the parent corporation.”  On the basis of her opinion that the adequacy (or 
inadequacy) of Anthem’s proposed rates should be viewed through the lens of 
 
5 
Anthem’s overall corporate health, the Superintendent found that Anthem’s 
“[p]rofits, including those achieved from Anthem’s individual health insurance 
business in [Maine],” contributed to a company-wide surplus that “increased from 
$209,500,000 in 2009 to $229,100,000 in 2010.”  As a result of the overall 
profitability of the company’s health insurance products, including the pre-tax 
profitability trend of the individual product lines,3 the Superintendent found that 
between 2007 and 2010 Anthem was able to make dividend payments of over 
$184 million, including over $20 million in 2010 alone, to its corporate parent. 
[¶8]  Against the weight of Anthem’s individual product line profitability 
and Anthem’s company-wide success, the Superintendent cited the sworn 
testimony of nearly forty 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 order to protect the public interest in maintaining “affordable 
individual health insurance rates to the fullest extent possible” and alleviate “the 
concern that rising rates have caused adverse selection4 in Anthem’s individual 
                                         
3  The Superintendent found, consistent with Anthem’s rate submissions, that the 2010 approved rate 
increase, which included a 0.5% built-in risk and profit margin, had netted Anthem a pre-tax profit of 
2.5%, or $1,542,000. 
 
4  Adverse selection is a term of art used in the insurance field to describe the phenomenon in which 
groups of insureds “will have a higher proportion of less desirable risks because more applications for 
 
 
6 
insurance business,” the Superintendent ultimately concluded that Anthem’s 
proposed average rate increase of 9.2%,5 which included a 3% built-in risk and 
profit margin, was “not inadequate,” but was “excessive and unfairly 
discriminatory in contravention of section 2736.”  As part of her conclusion, the 
Superintendent specifically identified the problematic dimension of Anthem’s 
proposed 3% risk and profit margin: “While Anthem’s 3% risk and profit margin 
in its 2011 rate development might be appropriate under a different evidentiary 
record, . . . it would contribute to making this year’s 9.7% [sic] requested average 
rate increase excessive.” 
[¶9]  The Superintendent advised in the May 12 decision that she would 
approve a 5.2% average rate increase with a 1% built-in risk and profit margin.  
Immediately following that decision, Anthem submitted a revised filing intended 
to comply with its terms.  The Superintendent issued a subsequent order on 
May 18, 2011, putting into effect the approved 5.2% rate increase and 
corresponding 1% built-in risk and profit margin.  See 24-A M.R.S. § 2736-B. 
                                                                                                                                  
the insurance will tend to come from those who get a better bargain.”  1 Jeffrey E. Thomas, New 
Appleman on Insurance Law Library Edition § 1.01(4)(b) (2011). 
 
5  As noted by the Attorney General in its brief, the Superintendent inadvertently referenced Anthem’s 
initially proposed 9.7% average rate increase rather than the amended 9.2% average rate increase in the 
May 12, 2011, decision and order. 
 
7 
[¶10]  Anthem filed a petition for review of final agency action in the 
Superior Court pursuant to M.R. Civ. P. 80C and 5 M.R.S. § 11002 (2011).  
Anthem requested that the Superintendent’s May 12 decision be vacated and 
remanded so that the Superintendent could “undertake the proper analysis to 
design rates that include a fair and reasonable rate of return,” which Anthem 
contends should include approving at least a 3% built-in risk and profit margin as 
initially proposed.  The court affirmed the Superintendent’s decision on August 
29, 2011.  Anthem filed this timely, expedited appeal in hopes of avoiding the 
mootness inquiry that guided our decision in Anthem Health Plans of Me., Inc. v. 
Superintendent of Ins., 2011 ME 48, 18 A.3d 824.  Because the 2011 rates that the 
Superintendent approved remain in effect until June 30, 2012, the issue of whether 
the Superintendent committed legal error in disapproving Anthem’s proposed 
rates is ripe for review. 
II.  DISCUSSION 
 
[¶11]  In this appeal the parties primarily dispute the definition of 
“inadequate” that the Superintendent used in approving a 5.2% average rate 
increase for Anthem’s health insurance products.  The Superintendent’s 
interpretation of “inadequate” as a standard that protects an insurer’s “financial 
integrity” comports with the majority of other jurisdictions that define an 
“inadequate” rate as one that either threatens an insurer’s solvency or would tend 
 
8 
to destroy competition or create a monopoly,6 or as a rate that is insufficient to 
cover an insurer’s anticipated costs and obligations in providing a particular class 
of insurance.7 
[¶12]  Anthem argues that the Superintendent’s interpretation of the term 
“inadequate” improperly shifts the focus of the rate inquiry from “protecting the 
insurer’s side of th[e] regulatory bargain,” which would be accomplished by 
approving a rate that includes a constitutionally mandated “fair and reasonable 
rate of return,” to an inquiry that protects only policyholders from a rate that 
would threaten the solvency of the insurers.  In other words, Anthem argues that 
the insurance rates approved by the Superintendent in this instance are inadequate 
                                         
6  See Cal. Ins. Code § 12401.3(a) (West 2011); Conn. Gen. Stat. Ann. §§ 38a-665(a), 686(a)(2) 
(West 2011); Ga. Code Ann. § 33-9-4(3) (West 2011); 22 Guam Code Ann. § 18502(c) (2011); Idaho 
Code Ann. § 41-1405(3) (2011); La. Rev. Stat. Ann. § 22:1452(C)(9) (West 2011); Md. Code Ann., Ins. 
§ 11-306 (b)(3)(i)-(ii) (West 2011); Mass. Gen. Laws Ann. ch. 175E, § 4(a) (West 2011); Mich. Comp. 
Laws Ann. §§500.2109(b), 500.2403(1)(d), 500.2603(1)(d) (West 2011); Miss. Code Ann. 
§ 83-2-3(1)(c) (West 2011); Mo. Ann. Stat. § 379.470(3) (West 2011); Mont. Code Ann. 
§ 33-16-201(1)(c) (West 2011); Neb. Rev. Stat. Ann. § 44-7510(2) (LexisNexis 2011); N.H. Rev. Stat. 
Ann. § 412:15(I)(c)(1)-(2) (West 2011); N.C. Gen. Stat. Ann. § 58-40-20(d)(1)-(4) (West 2011); 
Or. Rev. Stat. Ann. § 737.310(2)(b)(A)-(B) (West 2011); 77 Pa. Cons. Stat. Ann. § 1035.4(a)(3)(i)-(ii) 
(West 2011); Tex. Ins. Code Ann. §§ 560.002(c)(1)(A)-(B), 2251.051(C)(1)-(2) (Vernon 2011); 
Va. Code Ann.  § 38.2-1904(A)(2) (West 2011); Wyo. Stat. Ann. § 26-14-103(a)(iv) (West 2011). 
 
7  See Ariz. Rev. Stat. Ann. § 20-356(1) (2011); Ark. Code Ann. § 23-67-208(c) (West 2011); 
Colo. Rev. Stat. Ann. § 10-4-403(1)(b) (West 2011); Conn. Gen. Stat. Ann. § 38a-418(c) (West 2011); 
Del. Code Ann. tit. 18, § 2604(a)(2)(a)-(b) (2011); Fla. Stat. Ann. § 624.482(3) (West 2011); 215 Ill. 
Comp. Stat. Ann. 5/456(1)(d) (West 2011); Ind. Code Ann. § 27-1-22-3(a)(4) (West 2011); Kan. Stat. 
Ann. § 40-953 (West 2011); Minn. Stat. Ann. § 70A.04(3) (West 2011); Nev. Rev. Stat. Ann. 
§ 686B.050(3) (West 2011); N.M. Stat. Ann. § 59A-17-6(D) (West 2011); R.I. Gen. Laws § 27-44-5(c) 
(2011); S.C. Code Ann. § 38-75-970(C) (2011); Tenn. Code Ann. § 56-5-303(c) (West 2011); 
Utah Code Ann. § 31A-19a-201(3)(a)-(b) (West 2011); Vt. Stat. Ann. tit. 8, § 4685(c) (2011); V.I. Code 
Ann. tit. 22 §1491(c) (2011); W. Va. Code Ann. § 23-2C-18(e) (West 2011); Wis. Stat. Ann. § 625.11(3) 
(West 2011); Wyo. Stat. Ann. § 26-23-325(c) (2011). 
 
 
9 
not because a profit margin was not considered, but because Anthem is entitled to 
“a fair and reasonable rate of return,” which it defines as a rate that must include a 
built-in 3% risk and profit margin consistent with the industry-wide average. 
A. 
Standard of Review 
[¶13]  We review a decision of the Superintendent directly for an abuse of 
discretion, error of law, or findings not supported by the evidence.  York Ins. of 
Me., Inc. v. Superintendent of Ins., 2004 ME 45, ¶ 13, 845 A.2d 1155.  We will 
generally uphold an administrative rating decision “so long as it is reasonable and 
supported by substantial evidence.”  Me. Water Co. v. Pub. Utilities Comm’n, 
482 A.2d 443, 451 (Me. 1984).  We “accord due consideration to the 
Superintendent’s interpretation and application of technical statutes and 
regulations and will overturn the Superintendent’s action only if the statute or 
regulation plainly compels a contrary result.”  Me. AFL-CIO v. Superintendent of 
Ins., 595 A.2d 424, 429 (Me. 1991).  Anthem requests that we determine whether 
the Superintendent’s interpretation of the “not . . . inadequate” language violates 
the letter and intent of 24-A M.R.S. § 2736(2) and the United States and Maine 
Constitutions.  See Anthem, 2011 ME 48, ¶ 17, 18 A.3d 824 (Levy and Mead, JJ., 
dissenting). 
[¶14]  Having previously discerned that the phrase “not . . . inadequate” as 
used in 24-A M.R.S. § 2736(2) is ambiguous, Anthem, 2011 ME 48, ¶ 12, 18 A.3d 
 
10 
824, we review the Superintendent’s interpretation of the ambiguous statutory 
term for reasonableness and accord “great deference” to the Superintendent’s 
interpretation unless the statute plainly compels a contrary result.  Dep’t of Corr. 
v. Pub. Utilities Comm’n, 2009 ME 40, ¶ 8, 968 A.2d 1047 (quotation marks 
omitted).  There is no dispute that the term “inadequate” is not expressly defined 
in 24-A M.R.S. § 2736(2) and is, as argued by the parties here, reasonably 
susceptible to two meanings.  Id. 
B. 
The 24-A M.R.S. § 2736(2) Rate Approval Process 
[¶15]  The parties have offered differing opinions on what they think the 
term “inadequate” means in the context of the rate approval process for individual 
health insurance products in Maine.  Anthem disputes whether the 
Superintendent’s definition of the term falls within the broad parameters of 
reasonableness.  Anthem argues that “inadequate” is a term of art in the insurance 
rating field that can only be applied and understood as guaranteeing insurers a 
reasonable profit on regulated insurance products.  We agree that the inadequacy 
component of the rate approval scheme contained in 24-A M.R.S. § 2736(2) 
generally protects an insurer’s interest in remaining a financially viable provider.  
However, we do not agree with Anthem’s position that a built-in risk and profit 
 
11 
margin is guaranteed by the definition of “inadequate,” or by the rating approval 
framework for individual health insurance products more generally.8 
 
[¶16]  Unlike other statutory provisions in the Maine Insurance Code, e.g., 
24-A M.R.S. § 2303(1)(C)(3) (2011) and 24-A M.R.S. § 2382(5)(C) (2011), there 
is no provision in 24-A M.R.S. § 2736(2) requiring the Superintendent to consider 
an insurer’s reasonable profits in approving rates for individual health insurance 
products.  In approving rates for casualty, surety, property, marine, inland marine, 
and title insurance, section 2303(1)(C)(3) requires that the Superintendent give 
“[d]ue consideration . . . [t]o a reasonable margin for underwriting profit and 
contingencies.”  Similarly, in the rating standards applicable to workers’ 
compensation insurance, section 2382(5)(C) provides that “[r]ates may contain 
provision for contingencies and allowance permitting a reasonable profit.”  If an 
insurer includes a profit provision, the onus then falls on the Superintendent to 
determine “the reasonableness of [the] profit, consider[ing] . . . all investment 
income attributable to premiums, the reserves associated with those premiums and 
the amount of capital and surplus allocable to the coverage of risks in the State.”  
Id.  In what may be the best evidence of the Legislature’s intent concerning the 
                                         
8  Oklahoma stands as the lone outlier among the states insofar as its insurance code defines an 
“inadequate rate,” in the alternative, as a rate that “is insufficient to cover projected losses, expenses and 
a reasonable margin for profit for the line of insurance coverage to be offered . . . by the filer.”  
Okla. Stat. Ann. tit. 36, § 902(2)(c) (West 2011). 
 
12 
rating approval scheme for individual health insurance products pursuant to 
24-A M.R.S. § 2736(2), health insurance is specifically excluded from the rating 
standards that are applied in approving rates for casualty, surety, property, and 
other insurance products regulated by the Superintendent.  See 24-A M.R.S. 
§ 2302(2)(B) (providing that the general “making of rates” provision contained in 
24-A M.R.S. § 2303, which requires the Superintendent to give “due 
consideration” to a reasonable margin for underwriting profit in approving rates, 
“shall not apply to . . . [h]ealth insurance”). 
[¶17]  These provisions make clear that, although a profit margin may be 
included and must be considered by the Superintendent in approving rates for 
other types of regulated insurance products in Maine, when the Superintendent 
approves health insurance rates, there is no statutory requirement that the 
Superintendent consider a profit margin, let alone that the approved rates include a 
reasonable profit.  See 24-A M.R.S. §§ 2303(1)(C)(3), 2382(5)(C).  If the 
Legislature had intended that the Superintendent give “due consideration” to a 
reasonable profit margin or include in the approved rate a reasonable profit margin 
guaranteeing a health insurer’s profits somewhere near the industry-wide average 
of 3%—either through the definition of “inadequate” or through a standalone 
profit provision—then the Legislature could have affirmatively imposed those 
requirements in 24-A M.R.S. § 2736, as it did in other sections of the Maine 
 
13 
Insurance Code.9  See Anderson v. Cape Elizabeth Sch. Bd., 472 A.2d 419, 421 
(Me. 1984) (“In the absence of any manifest legislative intent to the contrary, 
statutes must be construed in accordance with the natural import of the terms used 
without resort to subtle and forced constructions for the purpose of limiting or 
extending their operation.”). 
[¶18]  The Superintendent’s interpretation of the term “inadequate” passes 
the reasonableness test, not only because her definition incorporates the various 
definitional components of “inadequate” used by a significant majority of other 
jurisdictions, but also because 24-A M.R.S. § 2736 is devoid of any language 
suggesting that the Superintendent must consider an insurer’s profit in approving 
rates for individual health insurance products.  In short, there is nothing in the 
language or statutory framework of 24-A M.R.S. § 2736(2) that compels a 
                                         
9  An examination of the statutes governing the administrative rating of insurance rates in other 
jurisdictions shows generally that if an insurer’s profits are to be “considered” as a factor in the rate 
approval process, then that command is explicitly incorporated into the statutory scheme.  See, e.g., 
Ariz. Rev. Stat. Ann. § 20-356(2); Cal. Ins. Code § 12401.3(b); Conn. Gen. Stat. Ann. §§ 38a-418(e), 
665(b), 686(b)(1); Del. Code Ann. tit. 18, § 2604(b)(5); Ga. Code Ann. § 33-9-4(4); 22 Guam Code Ann. 
§ 18502(d); 215 Ill. Comp. Stat. Ann. 5/456(1)(a); Ind. Code Ann. § 27-1-22-3(a)(1); Md. Code Ann. 
Ins. § 11-306 (c)(3); Mass. Gen. Laws Ann. ch. 175E, § 4(b); Mich. Comp. Laws Ann. 
§§ 500.2403(1)(a), 500.2603(1)(a); Miss. Code Ann. § 83-2-3(2)(a); Mo. Ann. Stat. § 379.470(4); 
Mont. Code Ann. § 33-16-201(2)(a); Neb. Rev. Stat. Ann. § 44-7510(1); N.H. Rev. Stat. Ann. 
§ 412:15(II)(a); Or. Rev. Stat. Ann. § 737.310(4); 77 Pa. Cons. Stat. Ann. § 1035.4(b)(3); R.I Gen. Laws 
§ 27-44-5(e)(4); S.C. Code Ann. § 38-75-970(E); Va. Code Ann. § 38.2-1904(B)(1)(iii); Wyo. Stat. Ann. 
§ 26-23-325(e). 
 
 
14 
definition of “inadequate” contrary to the “financial integrity” definition used by 
the Superintendent.10 
 
[¶19]  Although the “not inadequate” standard protects an insurer’s 
“financial integrity” or its ability to cover the costs associated with offering an 
insurance product, concern for the insurer’s financial position is balanced by the 
competing statutory demand that the Superintendent analyze whether a proposed 
rate is “excessive.”  24-A M.R.S. § 2736(2).  Anthem does not dispute that the 
term “excessive,” as the Superintendent interpreted it in the context of the 
24-A M.R.S. § 2736(2) rate approval scheme, generally protects the interest of 
existing and potential consumers by maintaining premium rates at levels that will 
“protect[] the viability of the [individual] insurance pool, keep[] premiums as 
reasonable as possible, and minimize[] adverse selection.” 
 
[¶20]  In a contention that became more clear at oral argument, the Attorney 
General advocated a position that the term “inadequate” operates as a floor and 
the term “excessive” operates as a ceiling on what may be considered a reasonable 
rate increase under any set of circumstances.  As with any highly regulated 
industry, the rate approved for annual premium increases for any given year may 
                                         
10  We note additionally that the Superintendent’s interpretation of “inadequate” is nearly identical to 
the definition of “inadequate” that appears in Maine’s Workers’ Compensation Rating Act: “A rate is not 
inadequate unless insufficient to sustain projected losses and expenses and the use of the rate has had a 
tendency to create a monopoly or, if continued, will tend to create a monopoly in the market or will 
cause serious financial harm to the insurer.”  24-A M.R.S. § 2382(3) (2011) (emphasis added). 
 
15 
ultimately depend on economic conditions not within the control of the 
Superintendent, the insurer, or the insureds.  The Superintendent, as the 
administrative officer charged with approving rates for individual insurance 
products in Maine, is and should be given a considerable degree of latitude in 
selecting a rate that is sufficient to meet the statutory mandate that the rate “not be 
excessive, inadequate or . . . discriminatory[.]”  24-A M.R.S. § 2736(2). 
[¶21]  We conclude that the Superintendent applied reasonable 
interpretations of the statutory terms “inadequate” and “excessive,” and employed 
a reasonable approach in arriving at her decision that Anthem’s proposed rate 
increase of 9.2%, with a 3% built-in risk and profit margin, was “excessive.”  She 
properly concluded that a rate increase of 5.2% with a built-in risk and profit 
margin of 1% was “not inadequate” using the balancing analysis required by 
24-A M.R.S. § 2736(2).  The Superintendent succinctly stated this approach in her 
decision:  
Whether and to what extent Maine law requires regulated individual 
health insurance rates to include a projected profit margin as Anthem 
maintains, the . . . determination of what is an approvable rate for a 
one-year period (including what, if any, built-in expected profit to 
provide) involves a balancing of investor and consumer interests.  In 
other words, the amount at which to approve a built-in expected 
profit in regulated rates, must balance the need for a rate not to 
threaten the company’s or enterprise’s financial integrity against the 
legitimate government interests of protecting the viability of the 
insurance pool, keeping insurance premiums as reasonable as 
possible, and minimizing adverse selection. There is no bright-line 
 
16 
test. The analysis involves a factual inquiry based on the evidence in 
the record at the time of the rate review. 
 
The Superintendent’s construction of the overall rating scheme recognizes the 
tension between a proposed rate’s excessiveness and its inadequacy.  The 
definitions the Superintendent employed in striking this balance are not so 
different from the authority Anthem cites for the proposition that an approved rate 
must ultimately lie somewhere between one that is not confiscatory and one that 
does not, because of its perceived excessiveness, pose an undue burden on 
existing and potential consumers.  See Calfarm Ins. Co. v. Deukmejian, 771 P.2d 
1247, 1256-57 (Cal. 1989);11 Mass. Bonding & Ins. Co. v. Comm’r of Ins., 
107 N.E.2d 807, 811 (Mass. 1952). 
[¶22]  Faced with the testimony from nearly forty existing Anthem 
individual health plan subscribers who described the additional financial hardship 
a 9.2% average rate increase would impose upon them, the Superintendent did not 
err in concluding that the 3% built-in risk and profit margin Anthem initially 
                                         
11  Anthem relies heavily on the California Supreme Court’s decision in Calfarm for the proposition 
that employing a solvency standard offends general rate-making principles and requests a conclusion that 
an inadequate rate—one that does not account for a reasonable return or reasonable profits—is per se 
confiscatory and unconstitutional.  Calfarm, 771 P.2d at 1252-59.  Calfarm, however, is distinguishable 
on its facts.  In this case, we are not dealing with a ballot initiative measure that would require insurers to 
immediately reduce premium rates by twenty percent without a means to pursue individualized relief 
from rates (unless “substantially threatened with insolvency”) that would be plainly insufficient for the 
various insurers to either cover their losses or make a fair rate of return.  Id.  The question of whether the 
Superintendent was required to include, as a matter of law, a “built-in” profit margin in the context of 
approving or disapproving Anthem’s proposed rate increase presents an entirely different question.  
See 24-A M.R.S. § 2736(2). 
 
17 
proposed would have contributed to what she considered an “excessive” rate 
increase.  We accord the ordinary degree of deference to the Superintendent’s 
interpretation of the language in 24-A M.R.S. § 2736(2) and the balancing 
analysis the Superintendent employed in discharging the statutory command of 
24-A M.R.S. § 2736(2).  We thus find no error in the Superintendent’s approval of 
a rate average increase of 5.2% with a built-in 1% risk and profit margin in view 
of her conclusion that the rate, so approved, would neither be excessive for 
consumers, nor inadequate for Anthem. 
C. 
Cross-Subsidization and Confiscatory Taking 
 
[¶23]  Because the Superintendent provided for a built-in 1% risk and profit 
margin, Anthem’s arguments regarding cross-subsidization and confiscatory 
taking are without merit.  An examination of the financial picture of the regulated 
individual insurance lines shows that Anthem will not have to rely on its group 
customers, its surplus, or its equity in the business to “subsidize” its regulated 
line.12 
 
[¶24]  Even if we were to accept Anthem’s argument that the general 
prohibition against cross-subsidization applied in utility ratemaking similarly 
                                         
12  It is not necessary for us to decide the propriety of the Superintendent’s decision to consider the 
financial health of Anthem’s overall business in determining the rate for the regulated lines because we 
have determined that the financial projections of the regulated line, even at the rate approved by the 
Superintendent here, provide sufficient profit to make the issues of cross-subsidization and 
unconstitutional taking irrelevant. 
 
18 
applies to the statutory framework of 24-A M.R.S. § 2736, Anthem has provided 
no evidence that cross-subsidization is in fact occurring in this case.  The 
anti-cross-subsidization principle announced in Me. Water Co., 482 A.2d at 
455-57, would require Anthem to establish that the allegedly “inadequate” rates 
approved by the Superintendent are causing a situation where the costs of paying 
for and providing the individual product lines are being borne by a corresponding 
increase in the rates of Anthem’s non-regulated group insurance.  See id. at 
455-56 (recognizing the “fundamental objective in utility ratemaking . . . that 
customers who benefit from a service should bear the costs of providing that 
service.” (quotation marks omitted)). 
[¶25]  There is no evidence in the record to suggest that the approved rate 
increases will inexorably result in higher rates being charged to Anthem’s 
unregulated group insurance consumers.  To say that Anthem might occasionally 
need to use its substantial company-wide surplus, which we agree is funded in 
large part by the financial success of its unregulated group insurance products, to 
pay for intermittent losses sustained by the individual lines, is both in form and 
substance a different statement than saying that its group consumers are in fact 
being charged higher rates in order to subsidize the regulated lines.  Without some 
discernable proof that cross-subsidization is occurring as a result of the rate 
approved by the Superintendent that included a 1% risk and profit margin, 
 
19 
Anthem’s argument falls short of persuading us that the Superintendent 
overstepped the bounds of her statutory authority by using her concept of the 
“inadequate” standard as a vehicle to consider the financial health of the company 
as a whole.  See Blue Cross of Kan., Inc. v. Bell, 607 P.2d 498, 508 (Kan. 1980) 
(providing that the evidence must show as a factual matter “that a rate structure in 
fact imposes on one class [the] costs created by another”).  This conclusion is 
bolstered by the profit generated by Anthem’s individual health insurance 
products since 2000, not only covering the costs associated with providing 
individual coverage, but also contributing to Anthem’s company-wide surplus.13 
 
[¶26]  Finally, there is no evidence that a confiscatory taking has occurred 
in violation of the United States or Maine Constitutions.  The Fifth Amendment to 
the United States Constitution provides that private property may not be taken for 
public use without just compensation.  U.S. Const. amend. V.  Maine’s 
constitutional counterpart provides that “[p]rivate property shall not be taken for 
public uses without just compensation; nor unless the public exigencies require 
it.”  Me. Const. art. I, § 21.  We have long interpreted these provisions similarly.  
See Bell v. Town of Wells, 557 A.2d 168, 177-78 (Me. 1989). 
                                         
13  Based on Anthem’s rate development submissions, the Superintendent found that from 2000 to 
2010, Anthem’s individual product line had generated a pre-tax profit of approximately 15.5 million 
dollars, or a 2.1% profit over the time it has provided individual health insurance products in Maine.  
There can be no dispute that over the period Anthem has offered its individual products to Maine 
consumers, the individual line has been self-sustaining and contributed to its company-wide surplus. 
 
20 
[¶27]  We have intimated that a “confiscatory rate” occurs in the insurance 
rating field where the approved rate denies a regulated entity “the opportunity to 
realize a reasonable return on [its] investment” and where “the inadequate return 
results directly from the rate approval process and not from other causes.”  Nat’l 
Council on Comp. Ins. v. Superintendent of Ins., 481 A.2d 775, 781 (Me. 1984). 
 
[¶28]  For the purposes of analyzing Anthem’s claim of confiscatory taking, 
we generally accept the proposition that an insurer subjecting itself to a regulatory 
rating scheme cannot be forced to operate its business at a loss or at such 
legislatively imposed, diminished margins that the risk of a confiscatory taking 
would be manifest.  See Calfarm, 771 P.2d at 1255.  But this is not the situation 
Anthem faces under the Superintendent’s construction of 24-A M.R.S. § 2736(2).  
By Anthem’s own estimation, the approved 5.2% average rate increase, which 
includes a 1% risk and profit margin, is projected to produce a nearly $4,000,000 
profit for the rate year 2011-2012.  Assuming we were to adopt the constitutional 
standards the United States Supreme Court has applied in the public utility 
ratemaking cases to the Superintendent’s rating analysis in 24-A M.R.S. 
§ 2736(2), Anthem’s argument that the Superintendent misinterpreted the term 
“inadequate” would have no bearing on our decision:  
[I]t is not theory but the impact of the rate order which counts. If the 
total effect of the rate order cannot be said to be unreasonable, judicial 
 
21 
inquiry . . . is at an end. The fact that the method employed to reach 
that result may contain infirmities is not then important. 
 
Duquesne Light Co. v. Barasch, 488 U.S. 299, 310 (1989) (alteration in original) 
(quoting F.P.C. v. Hope Natural Gas Co., 320 U.S. 591, 602 (1944)).  Because 
Anthem suffers no losses, and indeed anticipates that it will earn a profit on the 
rates approved by the Superintendent, neither the rating nor the method used in 
arriving at the approved rate results in an unconstitutional taking. 
III.  CONCLUSION 
 
[¶29]  The Superintendent properly balanced the competing interests within 
the statutory framework of 24-A M.R.S. § 2736(2) in arriving at an approved rate 
increase of 5.2% for the second half of the 2011-2012 rate year.  Although not 
required to do so pursuant to 24-A M.R.S. § 2736(2), the Superintendent did 
consider Anthem’s request for a 3% built-in risk and profit margin and 
specifically incorporated a 1% built-in risk and profit margin into the final 
approved rate.  Because the rate approved by the Superintendent provided a 
built-in risk and profit margin, Anthem’s argument that the Superintendent 
approved a rate by improperly cross-subsidizing between Anthem’s regulated and 
unregulated product lines, and the corollary argument that the approved rate 
resulted in a confiscatory taking in violation of the United States and Maine 
Constitutions, necessarily fail as a matter of law. 
 
22 
 
The entry is: 
 
 
 
Judgment affirmed. 
 
 
 
 
 
 
 
On the briefs: 
 
Christopher T. Roach, Esq., Catherine R. Connors, Esq., and Joshua D. 
Dunlap, Esq., Pierce Atwood LLP, Portland, for appellant Anthem Health 
Plans of Maine, Inc. 
 
William J. Schneider, Attorney General, and Thomas C. Sturtevant, Jr.,  
Jonathan R. Bolton, Andrew L. Black, Christina M. Moylan, and Scott W. 
Boak, Asst. Attys. Gen., Office of the Attorney General, Augusta, for 
appellees Superintendent of Insurance and Attorney General 
 
Joseph Ditré, Esq., and Andrea Irwin, Esq., Consumers for Affordable 
Health Care, Augusta, for appellee Consumers for Affordable Health Care 
 
Rufus E. Brown, Esq., Brown & Burke, Portland, for amicus curiae 
National Association of Insurance Commissioners 
 
 
At oral argument: 
 
Christopher T. Roach, Esq., for appellant Anthem Health Plans of Maine, 
Inc. 
 
Thomas Sturtevant, Jr., Asst. Atty. Gen., for appellees Superintendent of 
Insurance and Attorney General 
 
 
 
Business and Consumer Docket docket number AP-11-06 
FOR CLERK REFERENCE ONLY