As we noted in an item published a few weeks ago, the National Association of Insurance Commissioners (NAIC) approved recommendations on the medical loss ratio issue — how much of their revenues insurance companies should be required to spend on actual patient care.
Insurance companies have been complaining about it ever since, and approval of the regulations did not put the matter to rest.
The controversy is not so much the number, which is 80% for small-group plans and 85% for large-group plans, but what services should be included in that figure. The insurance industry, for example, wanted the cost of agents selling policies to be considered a medical cost.
The NAIC said no, and its position has been backed by Health and Human Services Secretary Kathleen Sebelius. Plans that go over the limit will have to issue rebates to the public starting in 2012.
But now two states, Florida and Iowa, are preparing to ask for a waiver on this provision through 2014, when the full weight of the new law goes into effect. And of course there’s now considerable reason, with Republican control of the House, for insurers to hope that the provisions like this one won’t go into effect at all.
Similar requests for waivers are under consideration in Maine, South Carolina and Georgia, according to Wednesday’s St. Petersburg Times.
The Florida Office of Insurance Regulation (OIR) believes that the medical-loss ratio provision would be “disruptive” to the state’s insurance industry, and that it would put smaller companies out of business.
The South Florida Business Journal said on Tuesday: “The OIR has expressed concern that these ratios could destabilize the marketplace because smaller companies might not be able to meet the requirement. It also is worried that insurance agents could get squeezed out of the market because their fees aren’t considered medical costs.”
And there would be a profit squeeze, to be sure. One Florida subsidiary of United Healthcare, according to the Times, would be forced to pay more than $38 million in rebates to 119,000 state policy holders under the provision.
The Obama administration has been granting waivers to some non-compliant health plans, such as those offered by McDonald’s. The question is, will officials continue to negotiate, or begin taking a more hard-line stance?