As State Commissioners Meet On Medical Loss Ratio, Insurers Warn Of Impact

CNNMoney: Insurers are warning that a provision in the health law that requires them to spend 80 or 85 percent of premiums they collect on actual medical costs and not administrative expenses could put them out of business. "The Obama administration is awaiting the recommendation of the National Association of Insurance Commissioners, meeting in Orlando this week, for how and when to implement key changes to the 'Medical Loss Ratio' rule. Under health reform, beginning 2011, insurance companies will have to spend 80% to 85% of the premiums they collect on care instead of toward their own profits and overhead costs. ... Prior to reform, requirements varied from state to state. In some cases, insurers didn't have to meet any minimum requirements." A Jan. 1 deadline to comply with new rules may not be feasible for many insurers, they say, and could drive them out of business. "For that reason, insurers asked the NAIC to consider a 'transition' period that allows insurers to gradually phase in the higher requirement" (Kavilanz, 10/18).

Politico: "In a letter to Sebelius, state insurance commissioners outlined the formal process by which they're going to ask for waivers and indicated that many of them plan to do so." Maine, Iowa and South Carolina have already asked for waivers from the rules. "The [state] commissioners are responsible for implementing the spending requirement in their states but have also been involved in drafting the federal regulation for HHS. … HHS has already awarded waivers to several companies — many of them retail establishments that offer plans with limited benefits — over concern that they won't be able to meet the minimum requirements" (Haberkorn, 10/19).

Also complicating MLR efforts is that up to "17 new insurance commissioners could take office as a result of the Nov. 3 elections, several state legislators cautioned Sunday at a meeting held in conjunction with the American Council of Life Insurers' annual meeting in Baltimore," National Underwriter reports. "'Regardless of which party fares better this fall, for our industry new governors typically mean new appointed insurance commissioners,' the ACLI staff report said. 'The prospect of one-third to one-half of the insurance commissioners turning over in the next several months is not out of the question,' the report said." Many are questioning what such turnover could mean for implementation of the health law (Postal, 10/18).

Politico Pulse reports, however, that the NAIC conference isn't likely to change proposed medical loss ratio rules largely written already. "The consensus among most folks we've talked to: The work of the subgroup – which put in literally hundreds of hours of deliberations – shouldn't be overturned at the very last minute, before the [document] goes to HHS. 'I would be very surprised,' if the regulation changes much, Iowa Insurance Commissioner Susan Voss (and incoming NAIC president) tells Pulse" (Kliff and Haberkorn, 10/19).

Related KHN material: Health On The Hill (Judd, Carey and Alonso-Zaldivar, 10/4).

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