The Man behind the Milestones Maine’s insurance superintendent looks back at decade in office

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Maine’s insurance superintendent Alessandro Iuppa left public office last week after nearly 10 years heading up the powerful Bureau of Insurance. He will join the private sector in a prominent position with the multinational Zurich Financial Services Group. His successor, who will be appointed by Gov. John Baldacci, has not yet been named.

During his tenure as superintendent, Iuppa has presided over two seismic events in Maine’s health insurance market, as well as their continuing aftershocks. The first was the sale in 2000 of Maine’s nonprofit Blue Cross and Blue Shield business to a national for-profit corporation. The second was the creation four years later of Baldacci’s ambitious but politically divisive DirigoChoice subsidized health insurance program.

Both events put Iuppa in the limelight, his rulings crucial to the changes underway. By expediting the Blue Cross sale, Iuppa ensured continued coverage for hundreds of thousands of Mainers enrolled in the collapsing nonprofit. As an unintended consequence, he also set the stage for the purchaser – Indiana-based Anthem Insurance, now a subsidiary of industry giant WellPoint – to become the pre-eminent health insurer in Maine, with a virtual monopoly on the nongroup market.

The $88 million price tag he accepted as the value of the Blues’ book of business was used to bankroll the Maine Health Access Foundation, the state’s largest health care philanthropy – but critics argued that the sale might have been averted and that the valuation should have been much higher.

The successful launch of DirigoChoice – currently administered, ironically, by its primary competitor, Anthem – is due largely to the superintendent’s testimony before the state Legislature that the plan’s untried business model was based on reasonable assumptions about enrollment, benefit structure and costs. He also endorsed, for each of the two years the plan has been in operation, a contentious dollar figure, known as the savings offset payment, which insurance companies are required to pay into the Dirigo program to support subsidies for lower-income enrollees.

Between and around these mileposts, Iuppa has overseen the work of about 80 people in the bureau who keep track of the insurance industry’s operations in Maine, where each year some $5 billion is paid in premiums to insure health, life, real estate, automobiles, medical practices, businesses and other concerns. Health insurance premiums account for the largest share of this figure – about $1.6 billion per year.

He also has presided over rate hearings and public forums, earning praise for his by-the-book conduct as well as criticism for granting insurance companies repeated double-digit rate increases in the cost of individual policies. He has weathered the hot-and-cold assessment of consumer groups, insurance lobbyists, state officials and others affected by his rulings.

Misunderstood industry

Most people don’t understand the nature of insurance in general, and of health insurance in particular, Iuppa said, taking a break recently from packing up his office, located inside a former industrial building on a side street in Gardiner.

“Insurance is a financial instrument, not a social program,” he said. “It’s a pooling of interest to protect yourself against financial misfortune.”

When he first joined the bureau 13 years ago, Iuppa said health insurance fit into this model, but now many people view insurance as a mechanism for funding predictable health care services instead of as a safeguard against disaster. The everyday utilization of insurance to pay for routine care, along with the rapid increase in medical charges and the cost of medicines, has played an important role in driving insurance rates up.

Though he was politically appointed to his post as superintendent – first in 1998 by independent Gov. Angus King and then again by Democratic Gov. John Baldacci in 2004, Iuppa blames Maine politicians and bureaucrats for blocking market-based industry fixes to the crisis. Specifically, Iuppa is critical of a cluster of regulations that Maine policymakers put in place in the early 1990s. These include “guaranteed issue” which requires insurers to offer coverage to anyone who can afford it, regardless of pre-existing conditions; “guaranteed renewal” which requires them to renew an individual policy even if the policyholder has been a very high user of services; and “community rating” which regulates how much an insurer can adjust the cost of a coverage from one group to another. While many states have implemented one or two of these consumer protections, the combination of the three creates an especially burdensome environment in Maine that discourages competition and innovation, he said.

Iuppa also would like to see Maine repeal “Rule 850,” which requires insurers to pay for health care services close to where their clients live, even if the local providers are not part of the company’s formal network. In a rural state like Maine, he said, Rule 850 imposes added costs and creates more problems than it solves.

Efforts by his office to dislodge some of these mandates through legislation and rulemaking have been blocked by “extremely inflexible” Democratic lawmakers, Iuppa said.

“I once got about three minutes before the Banking and Insurance Committee, and I’m still pulling the slings and arrows out,” he said.

Iuppa said he understands that the issue of corporate profits creates “anger, frustration and even angst” when so many people are unable to afford even basic coverage. But, he said, that negativity is misplaced – companies must be in strong financial shape to be reliable payers of health care claims.

“The concept of profit is not illegal,” he said, with some impatience. “I’m not going to sit here and defend corporate profits.”

The fledgling nonprofit DirigoChoice product may have a significant role to play in Maine health coverage, but policymakers must be willing to make changes in the plan’s design – including doing away with the onerous savings offset payment, Iuppa said.

“My hope is that in five years, we’ll have a national solution” to the health care crisis, he said.

“We’ve come to a point in this country where we need basic health care to be funded by our taxes, with additional coverage available for those who want it,” he said. But what will drive that change is not “social concerns” but economics, he predicted – “When Starbucks pays more for health insurance than it does for coffee.”

Iuppa is critical of “the strong sense of entitlement” in Maine, “a strong social ethic for cradle-to-grave assistance of all sorts.” And while some consumer advocates “would be comfortable in seeing health insurance collapse here so we could move toward single-payer health care,” he says their ideas are “short on substance.”

Consumer roadkill

Joe Ditre, executive director of Consumers for Affordable Health Care and a conspicuous critic of many of Iuppa’s rulings, said this week that overall, the superintendent has protected the solvency of insurance companies at the expense of Maine consumers. Iuppa’s willingness to allow dramatic rate increases in the cost of non-group coverage, he said, has driven more and more Mainers into the ranks of the uninsured.

However, Ditre praised Iuppa for his ruling in 2005 requiring insurance companies to pay $47.3 million to the Dirigo program, saying it sent an important message to the industry and to consumers. The amount was based on savings achieved in the health care system as a result of a number of state-imposed cost-containment strategies. As a result of these savings, insurers should have been able to negotiate lower reimbursement rates with hospitals and other health care providers. But insurers claimed their costs were unchanged – a claim Ditre calls “bogus.”

Iuppa’s ruling that the savings were real and measurable underscored the need to rethink the role of insurance companies in the health care system, according to Ditre.

“These companies are just collecting revenues and doing very little to bring prices down,” he said.

Ditre said Iuppa’s departure marks an important opportunity.

“The governor needs to find someone who can balance assuring the financial solvency of insurers with being cognizant of the needs of consumers to be able to purchase an essential commodity like health insurance,” he said. “I have heard [Baldacci] is looking for a more consumer-oriented superintendent. This is very heartening for us, after years of having had one who was not.”

Ditre predicted that Iuppa will be “happier” in the private sector and said he wishes him well.

Alice Knapp, a Richmond attorney who formerly headed up the bureau’s consumer protection division under Iuppa, said he has been a “competent” superintendent.

“But I think he has been unnecessarily industry-friendly and has chosen to maintain cordial relations … at the expense of consumers,” she said.

That said, Knapp credited her former boss with developing the bureau’s Web site during the Blue Cross sale to include essentially all public documentation relevant to the transaction. Since then, the site has continued to provide a remarkable amount of information of interest to the general public as well as to those professionally involved in the insurance industry, Knapp said.

Knapp said Iuppa is well respected by his regulatory colleagues as well as by the insurance industry. “But there’s no reason for consumers to be roadkill,” she said.

Industry approval

Perhaps it’s not surprising that Iuppa’s approval is higher within the insurance industry than with consumer groups. Katie Fullam Harris, director of governmental relations for Anthem Blue Cross and Blue Shield of Maine, said Iuppa “always has the best interests of consumers at heart. ”

The superintendent has never granted Anthem the full amount of a requested rate increase, she noted, despite the company’s best actuarial data supporting each request. “He always makes a very detailed review of the information and the methodology, and he always comes back with something different [than the original request],” she said.

While insurers have contested Iuppa’s rulings on the DirigoChoice savings offset payment and other issues, “We have certainly understood and respected his thought process,” Harris said.

She noted that Iuppa’s recently completed term as president of the National Association of Insurance Superintendents is an indication of the high regard his colleagues have for him.

Harris said Iuppa’s departure is “a big loss for Maine” and suggested his replacement should be someone similarly committed to protecting consumer interests and ensuring a balanced insurance environment.

Iuppa’s last day in office was Jan. 13. Former Deputy Superintendent Eric Cioppa has been named acting superintendent until Gov. Baldacci nominates a new superintendent. Jane Lincoln, the governor’s chief of staff, said this week the search for Iuppa’s successor will be conducted over the next month or two.

“We are at the beginning of that process now,” she said Thursday. “We are interested in finding an individual with the skills, knowledge and ability to provide leadership to the Bureau of Insurance in an era of many challenges and changes.” The search will be conducted with input from consumers and insurers. The nominee must be reviewed in a public hearing before the Insurance and Financial Services Committee and confirmed by the Senate.

The pay range for the position is $65,000 to $95,000.

“I’d describe this as probably the best job I’ve ever had,” Iuppa said at the end of last week’s interview. “There’s a heavy responsibility that comes with this role, but I take pride in how the agency has conducted itself and I like to think we’ve been able to do a lot of good.”