Opinion ID: 2598249
Heading Depth: 1
Heading Rank: 6

Heading: Feared increases in premiums.

Text: The Commissioner concluded, based upon the `projections' of her expert, that Anthem, being a for-profit company with a track record of profitability, would bring the two unprofitable BCBS lines of insurance (small groups and individuals) to profitability perhaps as early as 2005. The existing BCBS business plan calls for similar results, but with a goal date of 2007. The Commissioner also found that Anthem would achieve profitability in these two lines of insurance solely by raising premiums (although there are a variety of ways that could be accomplished, e.g., reduction of medical costs, closer attention to claims, new benefit designs, lower administrative costs, and membership growth). Thus, the Commissioner found that two classes of Kansas policyholders would pay higher premiums sooner (perhaps as much as 2 years) under Anthem. This she declared to be `hazardous or prejudicial' and/or `unfair and unreasonable' to Kansas insureds and grounds for denial under K.S.A. 40-3304(d)(1)(C) and (E). The difficulty with the Commissioner's position, even assuming the double and triple inferences are factually supported, is that the Kansas Supreme Court has previously held that `one risk group should not be subsidized at the expense of others.' Blue Cross & Blue Shield v. Bell, 227 Kan. 426[, 607 P.2d 498] (1980). Thus, it is contrary to the law of Kansas for an insurance company to use the proceeds from one line of insurance to subsidize another, each line being required to `stand alone.' When reduced to its simplest terms, the Commissioner has denied this acquisition in the first instance because she fears Anthem will bring the two unprofitable BCBS insurance lines to profitability (and thus within the law) sooner than BCBS itself would do. Obviously, the mere statement of such a proposition reveals its irrationality. To deny an acquisition so that two classes of BCBS insureds (small groups and individuals) can continue to reap unlawful benefits at the expense of other BCBS insureds (the elderly and infirm in Medicare plans) is a proposition so indefensible as a matter of law as to require no further refutation.