States, Waivers, & Medical Loss Ratios

17 states in all have submitted medical loss ratio rules waiver requests. Thus far only a handful have received approval for a waiver.

North Carolina

Insurance Commissioner Wayne Goodwin today announced on its North Carolina insurance department website that the state received approval from the U.S. Department of Health and Human Services for an adjustment to the applicable medical loss ratio standard for individual comprehensive health insurers in North Carolina.

The Patient Protection and Affordable Care Act (PPACA) requires insurance companies to spend at least 80 percent of premium dollars on medical care and health care quality improvement, rather than on administrative costs, starting in 2011. Upon request, the federal government may grant a state adjustments to the standard if it is determined that the 80 percent medical loss ratio requirement could destabilize the individual market in the state.

The federal government has adjusted the MLR standard for one year in North Carolina to 75 percent in 2011 and 80 percent in 2012 and beyond, which will help preserve consumer choice by allowing time for insurers to transition to the new requirements.

The decision was a slight modification from the state's original request that the 80 percent MLR requirement be adjusted to 72 percent in 2011, 74 percent in 2012 and 76 percent in 2013.

Wisconsin

The federal government has rejected Wisconsin's request to phase in a requirement that health insurers spend 80 cents of every dollar in premiums on medical care.

Gov. Scott Walker's administration wanted to implement the change over three years for health insurance sold to individuals and families. It also had proposed that health insurers be required to spend a minimum of 71 percent on medical claims in 2011 and 74 percent this year.

The state insurance commissioner contended that companies might be forced to leave the Wisconsin market if the so-called 80-20 rule were immediately implemented.

But the U.S. Department of Health and Human Services said the state failed to provide data to support that contention, according to a Milwaukee Journal Sentinel report. The agency said 12 of the 15 insurance companies that sell individual insurance in the state already are at or near the 80 percent spending mark, and two of the other three companies are expected to meet the requirement for 2012.

About 180,000 people in the state are covered by health insurance sold directly to families and individuals.

Indiana

In late November HHS rejected MLR exemption waivers requested by Indiana and Louisiana. HHS said that the states were able to meet the MLR standard, and that consumers would be better off if the exemption were not granted.

At least five carriers have withdrawn from the Indiana individual major medical health insurance market since the implementation of the Affordable Care Act (ACA) and another carrier is contemplating a withdrawal, according to a report by State Coverage Initiatives.

Louisiana

When Louisiana submitted data after its waiver proposal, it showed that the aggregate MLR of the non-dominant issuers in Louisiana’s individual market in 2010 was 79 percent, just under the 80 percent MLR standard. This indicated that the issuers possess the ability to meet the MLR standard in 2011.

Georgia

Georgia's MLR waiver was approved with amended ratios from the state's proposal. HHS determined that the adjustment should be lower than requested. Iowa had also previously received a waiver. Georgia will have to implement an MLR of 70 percent in 2011, 75 percent in 2012, and 80 percent in 2013, thus reaching the 80 percent requirement of the ACA one year earlier than it had requested. In its determination, HHS stated that 12 of the 18 largest issuers in the individual market had MLRs above 65 percent in 2010 and that even though some of the carriers will have to pay rebates, they have already reduced broker commissions, thereby decreasing the impact on their profits.

While consumer groups praise the idea of increasing the medical loss ratio threshhold agent groups have vehemently opposed them from the start as insurers have drastically cut sales commissions to cut costs to reach the 80% individual and 85% large group plateaus.