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HHS Denies Florida a Waiver on Medical Loss Ratio Rule

By Dena Bunis, CQ HealthBeat Managing Editor

December 15, 2011 -- Health and Human Services officials Thursday denied the state of Florida a waiver from the health care overhaul's medical loss ratio requirements after the agency determined that requiring insurers to meet the new standard would not destabilize the market.

Florida becomes the fifth state to have its waiver denied. Steve Larsen, chief of the Center for Consumer Information and Insurance Oversight, said in a conference call with reporters that beyond his department's review of the financial evidence surrounding this request, his office received a petition from more than 3,000 Florida residents as well as letters from more than 20 consumer groups who opposed the waiver. That represents the most consumer input on a waiver application that federal officials have ever received, Larsen said.

Under the MLR rule, insurers in the individual market have to spent 80 cents of every premium dollar on medical claims or other quality improving activities. Beginning this year, any insurance company that doesn't meet that standard has to pay rebates to policyholders.

Larsen said his department "ultimately determined that the state of Florida has a very competitive individual market and there was not a risk that applying the 80-20 split" would destabilize the market.

Florida's Office of Insurance Regulation had asked for an adjustment of the MLR standard that would have allowed insurers to spend 68 percent of premium dollars on claims in 2011, 72 percent in 2012 and 76 percent in 2013. There was no immediate comment from Florida officials on CCIIO's decision.

Health Care for America Now, a consumer advocacy group, applauded the decision.

"The administration sent a clear message to health insurance companies that their days of ripping off consumers are over,'' HCAN Executive Director Ethan Rome said in a statement. "HHS also said that politically motivated, bogus requests by extremist governors to protect insurance company profits will not be tolerated. This decision highlights how much money families will save because of consumer protections in the health care law."

Larsen said in reviewing Florida's insurance market they found 20 companies operating in the state that were big enough to be subject to the rebate provisions spelled out in the MLR regulation. Of those, he said, nine companies had more than 10,000 enrollees, a sign he said, of "a very competitive market."

Although at a hearing in Florida more than a year ago, several companies threatened to exit the market in 2011, not one insurer has done so. Instead, Larsen said, the companies were modifying their business plans so they could meet the 80 percent MLR standard.

Based on 2010 data, CCIIO estimated that consumers would get rebates totaling more than $100 million. But Thursday, Larsen said he expects that number to be lower because insurance carriers are responding to the new law and pricing their products in a way that lowers premiums, making them not subject to such rebates.

So far CCIIO has approved waivers for Maine, New Hampshire, Nevada, Kentucky, Georgia and Iowa. Besides Florida, adjustments were denied for Indiana, Louisiana North Dakota and Delaware. With the decision in Florida, five pending applications remain.

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