Insurers, State, Square Off in Court

The eagerly anticipated, and exceptionally well-attended, insurer rate challenge hearing convened today in front of Superior Court Associate Justice Stephen Neel.

(coverage: Globe, Herald, and AP. Also, WBUR has an informative discussion of the impact on consumers, and watch the NECN coverage and WGBH’s Greater Boston discussion between Barbara Anthony, Undersecretary of Consumer Affairs, and Lora Pellegrini of MAHP, below):

The insurers (Mass. Assoc of Health Plans, BCBS, HMO Blue, Fallon, Harvard Pilgrim, Health New England, Neighborhood Health Plan and Tufts), have challenged as illegal and unconstitutional the decision of the Division of Insurance to reject proposed premium rates for April 2010. The insurers requested a preliminary injunction against the Commissioner that would allow the plans to offer coverage plans at the proposed, and rejected, 2010 rates. A preliminary injunction is used when the court rules that it is unfair to make a party, like the insurers, wait for a full court hearing to get relief from the burden they are under. The Division of Insurance, represented by Assistant Attorney General David Guberman, argued that the injunction should not be granted because this issue should not even be before the court.

We provided minute-by-minute updates of the hearing via twitter, so to get a flavor of the arguments, read our tweets.

We summarize the details below the fold:
At the hearing, the insurer’s lawyer Dean Richlin went first, suggesting that an injunction was warranted because of the severe harms the plans would experience without one. The actions by the Division have destabilized a highly regulated industry. He said that the April 2009 rates, which are still in effect, are grossly inadequate and that the carriers will lose millions if they have to sell insurance at that level. (Richlin also spent time laying out his argument against the rate disapprovals themselves, but these were not the subject of today’s hearing.)

He also argued that the administrative process would be futile and waste time. Richlin also raised up the distinction between for-profit carriers and non-profit carriers saying that the for-profit carriers (who reduced proposed rate increases to meet the cap imposed by DOI) were just complying with the Division’s requests because it was too much of a hassle to do otherwise. Richlin raised an interesting argument: if the carriers all started charging significantly lower rates (like the April 2009 rates), ALL small group participants will terminate their existing insurance contracts and get new insurance at the much lower rate. This will compound the anticipated loss for the 200,000+ individuals whose insurance renews on April 1st. Richlin argued that if the injunction is not granted, the administrative burden on the insurers will be overly cumbersome. Additionally, trying to collect money retroactively (assuming the insurers will be allowed to increase their rates) is too challenging for insurers and businesses buying insurance.

Guberman rebutted Richlin’s arguments saying that the court did not have jurisdiction to handle the case because the insurers had not gone through the proper administrative process. Only one carrier, Harvard Pilgrim, had filed for an administrative hearing, but the Division was ready to hear all of the others should they file appeals. Guberman said that the Commissioner would be willing to say that any insurer who went through the administrative process did not waive their rights to this or any other court proceeding. Guberman emphasized the impartiality of the hearing officers in these cases and the need for the court and the Division to behave prudently in determining whether the proposed rates are reasonable. He said that the insurers have not demonstrated sufficient harm to circumvent the administrative process and should not be granted an injunction. Guberman underscored this point by saying that the Division is acutely aware of insurers financial health and will never let them become insolvent.

The judge needs to decide whether the harm to the insurers is so significant that an injunction is warranted or whether the insurers should go through the administrative hearing process (exhausting all other options) before filing suit.

Next step: The Judge’s decision (possibly tomorrow, but definitely by Monday).

-Georgia J. Maheras

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