Five States Gain, Five States Denied Waivers From Loss Ratio Requirements

CCH® BENEFITS — 12/14/11

Five States Gain, Five States Denied Waivers From Loss Ratio Requirements

from Spencer’s Benefits Reports:

The Center for Consumer Information and Insurance Oversight (CCIIO) has now issued ten determination of state requests for waivers from certain medical loss ratio (MLR) requirements of the Patient Protection And Affordable Care Act (ACA). Through November, CCIIO has issued waivers to Iowa, Kentucky, Maine, New Hampshire, and Nevada. Waiver requests have been denied to Georgia (partial denial), Delaware, Indiana, Louisiana, and North Dakota.

MLR is calculated as the cost of health care services provided as a percentage of premium revenues. In general, the higher the MLR, the more an insurer spends on claims reimbursements and the less it spends on administration and marketing, or retains as profit. The ACA established an 80 percent MLR beginning in 2011.

The law allows the the Department of Health and Human Services to adjust the MLR standard for a state if it is determined that meeting the 80 percent MLR standard may destabilize the individual market. In order to qualify for this adjustment, a state must demonstrate that requiring insurers in its individual market to meet the 80 percent MLR has a likelihood of destabilizing the individual market and result in fewer choices for consumers.

The ACA requires health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the MLR. It also requires them to issue rebates to enrollees if this percentage does not meet minimum standards. MLR requires insurance companies to spend at least 80 percent or 85 percent of premium dollars on medical care, with the review provisions imposing tighter limits on health insurance rate increases. If they fail to meet these standards, the insurance companies will be required to provide a rebate to their customers starting in 2012.

Summaries of the recent waiver approvals are as follows:

Iowa. Iowa’s Department of Insurance requested an adjustment of the 80 percent MLR to a 60 percent MLR standard for 2011, 70 percent for 2012, and 75 percent for 2013. CCIIO has determined that the state can establish an MLR standard of 67 percent for 2011, 75 percent for 2012, and 80 percent thereafter.

Kentucky. Kentucky’s Department of Insurance requested an adjustment of the 80 percent MLR standard to 65 percent, 70 percent, and 75 percent for 2011, 2012, and 2013, respectively. CCIIO has determined that the state can establish an MLR standard of 75 percent for the year 2011, with the 80 percent standard to apply in 2012 and each year thereafter.

Maine. The Maine Bureau of Insurance requested an adjustment of the 80 percent MLR to a 65 percent MLR standard. HHS accepted the Maine Bureau of Insurance request for an adjustment to 65 percent for 2011 and 2012. HHS will allow the adjustment to continue through 2013, as Maine requested, if the state provides additional data at the end of 2012 to support a third year of the adjustment to 65 percent.

New Hampshire. The New Hampshire Insurance Department requested an adjustment to a 70 percent MLR standard for 2011, 2012, and 2013. CCIIO has determined that the state can establish an MLR standard at 72 percent for the year 2011, an MLR standard of 75 percent for 2012, with the 80 percent standard to apply in 2013.

Nevada. The Nevada Department of Insurance requested an adjustment of the 80 percent MLR to a 72 percent MLR standard for 2011. CCIIO has determined that the state can establish an MLR standard of 75 percent for 2011.

Summaries of the recent waiver denials are as follows:

Georgia. The Georgia Department of Insurance requested an adjustment of the MLR standard to 65 percent, 70 percent, and 75 percent for the reporting years 2011, 2012, and 2013, respectively. HHS will adjust the MLR standard in the Georgia individual health insurance market to 70 percent for 2011 and to 75 percent for 2012. The 80 percent statutory standard will apply in MLR reporting year 2013 and thereafter.

Delaware. The Delaware Department of Insurance requested an adjustment of the 80 percent MLR standard for its individual market to 65 percent for 2011, 70 percent for 2012, and 75 percent for 2013. HHS has determined that no adjustment to the MLR standard in Delaware is necessary.

Indiana. The Indiana Department of Insurance requested an adjustment of the MLR standard to 65 percent for 2011; 68.75 percent for 2012; and 72.5 percent for 2013. After reviewing Indiana’s application, HHS has determined that no adjustment to the MLR standard in Indiana is necessary.

Louisiana. The Louisiana Department of Insurance requested an adjustment of the MLR standard to 70 percent and 75 percent for the reporting years 2011 and 2012, respectively. After reviewing Louisiana’s application. HHS has determined that no adjustment to the MLR standard in Louisiana is necessary.

North Dakota. The North Dakota Department of Insurance requested an adjustment of the 80 percent MLR to 65 percent MLR for 2011, 70 percent for 2012, and 75 percent for 2013. CCIIO has determined that no adjustment to the MLR standard in North Dakota is necessary.