Indianapolis, IN (AP) - State insurance commissioners charged with
shaping a key rule for health care reform say the federal
government should consider phasing in the requirement to avoid a
potential exodus of insurers from the market.
Starting next year, insurers will be required to spend a certain
percentage of the premiums they collect on health care. These
medical loss ratios are normally an obscure statistic for the
average policy holder, but they will matter after Jan. 1. Companies
that don't meet targets in the new health care law will have to
rebate the difference to consumers.
The law calls for minimum medical loss ratios, or MLRs, of 80
percent for individual and small group health insurance and 85
percent for large group coverage. Analysts say the large group
minimum shouldn't be too difficult for insurers to meet. But the
individual and small group figure could cause problems.
The concern from the beginning was whether plans in those
markets would be able to meet the requirement, partly because of
high overhead costs due to agent commissions and other costs.
Insurers have warned that a rigid limit would force many of them to
leave certain markets.
State insurance commissioners met Wednesday in Washington with
President Barack Obama and his senior health policy staff to talk
about the issue.
Kansas Insurance Commissioner Sandy Praeger and Florida
commissioner Kevin McCarty, both Republicans, said they encouraged
the administration to find a way to ease the 80 percent
requirement, such as by phasing it in. Under the new law, states
that determine the requirement would cause insurers to flee their
local markets can apply to Health and Human Services Secretary
Kathleen Sebelius for a waiver.
Two states, Maine and Iowa, already have applied to the federal
government for exceptions from the rule, and others are considering
"The desire in this health reform is more companies competing,
not fewer," Praeger said.
Robert Laszewski, a former insurance executive who's now a
consultant, said insurance companies will leave markets if they
can't meet the 80 percent requirement.
"When they do that, they are going to leave a bunch of people
uninsured, many of whom probably have pre-existing conditions," he
On Thursday, the NAIC released its recommendations for the
framework of the MLR regulation, after months of discussions. The
32-page draft addresses a broad range of topics and variables. It
said, for instance, insurers can count things like health care hot
lines as an expense toward meeting minimum MLRs, as long as they
focus on care quality.
Robert Zirkelbach, a spokesman for the insurance trade
association America's Health Insurance Plans, said the group is
reviewing the draft "to determine the potential for disruption in
"As some commissioners have indicated, there is concern that
these regulations could have the unintended consequence of putting
at risk the coverage that some families and employers rely on
today," he said.
The draft must be approved by some additional committees and
then voted on by all members of the NAIC before the recommendation
is sent to Sebelius' office.