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Maine.gov > PFR Home > Insurance Regulation > Company Services > Maine Domestic Companies > Examination Reports
May 3, 2012
Eric A. Cioppa, Superintendent
Pursuant to the provisions of 24-A M.R.S.A. §221 and in conformity with your instructions, a financial examination has been made of
Anthem Health Plans of Maine, Inc.
at its statutory home office in South Portland, Maine. The following report is respectfully submitted.
REPORT OF EXAMINATION
ANTHEM HEALTH PLANS OF MAINE, INC.
DECEMBER 31, 2010
ACCEPTANCE OF REPORT OF EXAMINATION
WHEREAS a verified report of examination of Anthem Health Plans of Maine, Inc. dated May 3, 2012 was delivered to that insurer on May 23, 2012 and
WHEREAS Anthem Health Plans of Maine, Inc. and Bureau of Insurance staff have agreed to certain modifications with respect to the report of examination, and
WHEREAS I find such modifications proper, and
WHEREAS no hearing with respect to the report of examination has been requested by Anthem Health Plans of Maine, Inc,
NOW THEREFORE, I accept the report of examination as modified and hereby order it placed on file in the Bureau of Insurance as provided for by 24-A M.R.S.A. §226 (3).
Table of Contents
Scope of Examination...................................................................................................................................................... 1
Anthem Health Plans of Maine, Inc. (hereinafter, “Company”) was last examined as of December 31, 2006, by the State of Maine Bureau of Insurance (hereinafter, “Bureau”). This examination covered the period from January 1, 2007, to December 31, 2010.
This examination was performed pursuant to the risk-focused approach promulgated by the National Association of Insurance Commissioners (hereinafter, “NAIC”), and consisted of a review of the Company’s operations, administrative practices, valuation of assets, and determination of liabilities at December 31, 2010, in conformity with statutory accounting practices, NAIC guidelines, the 2010 Financial Condition Examiners Handbook (hereinafter “FCEH”), and the laws, rules, and regulations prescribed or permitted by the State of Maine.
Areas reviewed in this examination included claims administration and loss reserves, underwriting and premium policies, investments, reinsurance, and risk-based-capital requirements. To the extent deemed necessary, transactions occurring subsequent to the examination date were reviewed.
The results of this examination present the financial condition of the Company as of December 31, 2010. Comments on various balance sheet items, for purposes of this report, may be limited to matters involving clarification, departures from laws, rules and regulations, and/or significant changes in amounts.
On April 4, 2011, the superintendent issued a market conduct examination report for a targeted market conduct examination for the period of January 1, 2005, through December 31, 2008. The purpose of the market conduct examination was to assess whether the Company’s mental health and substance abuse benefits were at least equal to those received by a person receiving medical treatment. The market conduct report of examination can be found on the Bureau’s website.
On November 30, 2011, the Bureau approved the Company’s request to pay an ordinary dividend in the amount of $48,800,000 to ATH Holding Company, LLC on or about December 31, 2011.
On December 13, 2011, Express Scripts, Inc.(“EXS”) filed a Securities and Exchange Commission’s Form 8-K, indicating that EXS and WellPoint, Inc. (“WLP”), the Company’s ultimate parent, are involved in a contractual dispute regarding certain terms of the pharmacy benefits management agreement (the “PBMA”) entered into by the parties on December 9, 2009. The dispute raised by WLP relates to the contractual interpretation of certain terms in the PBMA and certain operational matters associated with EXS performance thereunder.
On February 28, 2012, the Maine Supreme Court rejected the Company’s claim that it has a right to a three percent profit and risk margin when setting individual health insurance premiums. Maine’s insurance superintendent reduced the margin to one percent and the state contended the superintendent acted within its discretion to keep insurance premiums affordable. In its ruling, the Maine Supreme Court said that the superintendent “properly balanced the competing interests” in arriving at an approved rate increase of 5.2% for the second half of the 2011-2012 rate year.
The Company was incorporated on March 10, 2000, in anticipation of the acquisition of Associated Hospital Service of Maine d/b/a Blue Cross and Blue Shield of Maine (hereinafter, “BCBSME”), by Anthem Insurance Companies, Inc. (hereinafter, “AICI”). By decision and order dated May 25, 2000, the superintendent granted the application of BCBSME to convert to a for-profit stock insurer and to voluntarily dissolve. The decision and order also approved the application of AICI, through AHPM, to acquire substantially all of the assets and assume substantially all of the liabilities of the converted BCBSME. The assets acquired included the stock and ownership interests in affiliates and subsidiaries of BCBSME. The decision and order additionally granted AHPM a certificate of authority to operate as a health insurer with a health maintenance organization (hereinafter, “HMO”) line of business.
At the time AHPM was incorporated, AICI was the ultimate controlling person in the insurance holding company system. AICI converted from a mutual insurance company to a stock insurance company on November 2, 2001, and, as part of the conversion, it became a wholly-owned subsidiary of Anthem, Inc., a new Indiana stock corporation created for the purpose of being the public holding company for the Anthem family of companies.
On December 21, 2000, the superintendent approved the January 1, 2001, merger of Central Maine Partners Health Plan, Inc. with its parent, AHPM. Central Maine Partners Health Plan, Inc. ceased operations on December 31, 2000, and merged into AHPM on January 1, 2001.
On November 23, 2004, the superintendent approved the merger of Maine Partners Health Plan, Inc. with its parent, AHPM. Maine Partners Health Plan, Inc. merged with its parent AHPM on January 1, 2005.
On November 30, 2004, Anthem, Inc. completed its acquisition of California-based WellPoint Health Networks Inc. and changed its name to WLP.
Effective December 28, 2010, Anthem East, LLC, the sole shareholder of AHPM, merged with and into ATH, making that company the new shareholder of AHPM.
An abbreviated organizational chart as of December 31, 2010 is presented below:
The Company’s articles of incorporation, bylaws, and minutes of the board of directors’ meetings held during the period under examination were reviewed.
The Company is a wholly-owned subsidiary of ATH Holding Company, LLC, whose ultimate parent is WLP. See Affiliated Entities for an abbreviated organizational chart.
The Company is governed and overseen by its board of directors and the management team of the Company.
As of December 31, 2010, the board of directors of the Company consisted of the following members:
As of December 31, 2010, the officers of the Company consisted of the following individuals:
Title 24-A M.R.S.A. §3413 identifies potential conflict of interest areas. As such, the Company requires each director and officer to complete a conflict of interest statement annually.
A blanket fidelity bond protects the Company. The $10,000,000 fidelity bond maintained by the Company satisfies the NAIC suggested amount of $2,000,000. The Company also maintains the customary coverage including, but not limited to, property, casualty, and workers’ compensation.
The Company is licensed to write accident and health insurance, including HMO products, in the State of Maine. Presently, the Company offers a wide variety of managed care and indemnity health insurance options to individuals and corporate customers within the State of Maine. These products are offered to both fully insured and “administrative services only” plans. In addition to providing managed care, the Company participates in the Medicare program regulated by the Centers for Medicare & Medicaid Services (hereinafter, “CMS”).
Amounts due to or receivable from the parent, subsidiaries, and affiliates represent the amounts payable or receivable under the inter-company administrative, service, and tax sharing agreements. The Company had the following agreements with affiliates at December 31, 2010:
The Company has two reinsurance agreements with AICI. The first coverage is a quota share agreement that provides surplus relief and would only be triggered by certain risk based capital ratios. The second coverage is an insolvency reinsurance agreement. These agreements represent compliance with ¶10 and ¶11 of the May 25, 2000, decision and order.
Accounts and records were reviewed and tested in order to assess the impact on the Company’s financial condition and conformity to related laws.
Pursuant to 24-A M.R.S.A. §412, the Company maintained the required security deposit with the Treasurer of Maine as follows:
The Company does not engage outside counsel. The Company’s internal legal counsel is not aware of any material pending or threatened litigation, claims or assessments, or any material unasserted claims or assessments at December 31, 2010.
The accompanying financial statements fairly present, in all material respects, the Company’s statutory financial position as of December 31, 2010, and statutory results of operations for the period then ended. The financial statements as of December 31, 2009, 2008, and 2007 are unexamined and are presented for comparative purposes only.
as of December 31, 2010, 2009, 2008, and 2007
Years Ended December 31, 2010, 2009, 2008, and 2007
Years Ended December 31, 2010, 2009, 2008, and 2007
The Bureau’s employed actuary, a FSA and MAAA, was assigned to perform an actuarial review and to perform certain actuarial analyses on the reserves reported by Anthem Health Plans of Maine at December 31, 2010. The actuarial opinion is included as an attachment to this report. See Appendix A.
The Company’s financial condition as reported by management is reflected in the statements and supporting exhibits contained in this report. The basis of preparation of such statements conforms to laws, rules, and regulations prescribed and/or permitted by the Bureau.
Acknowledgement of cooperation and assistance extended to the examiners by all Company personnel is hereby expressed.
State of Maine
Stuart E. Turney, being duly sworn according to law deposes and says that, in accordance with authority vested in him by Eric A. Cioppa, Superintendent of Insurance, pursuant to the Insurance Laws of the State of Maine, he has made an examination of the condition and affairs of
Anthem Health Plans of Maine, Inc.
located in South Portland, Maine as of December 31, 2010, and that the foregoing report of examination subscribed to by him is true to the best of his knowledge and belief. The following examiners from the Bureau of Insurance assisted:
Graham S. Payne
Subscribed and sworn to before me
Last Updated: August 22, 2012
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