HHS continues to carefully consider state requests to waive new MLR rule
By Consumers Union on Monday, July 25th, 2011
On Friday, it was announced that the Department of Health and Human Services rejected North Dakota’s request for a waiver to the new requirement that insurers spend at least 80% of premiums on medical care.
The new requirement aims to increase a company’s medical loss ratio, or MLR, to the benefit of consumers who’ll see less of their premium dollars spent on administrative costs like marketing and profits, and more spent on healthcare. If a company can’t meet the requirement they must pay back policyholders.
In denying the application, HHS stated that “there is no reasonable likelihood that implementation of an 80 percent MLR standard may destabilize North Dakota’s individual market.”
HHS has taken a careful approach to reviewing these applications to waive or phase-in the new requirement; rightly so given the stakes for consumers. We’ve already seen Aetna customers in Connecticut receive notice that they’ll get a 10% rate reduction, saving policyholders $259 annually, on average.
The new law gives HHS the flexibility to balance the need for protecting consumers’ pocketbooks with maintaining a competitive market for insurance. Unlike in North Dakota, the Department approved modified versions of waiver applications submitted by Iowa and Kentucky, giving those states extra time to meet the new requirement and preventing a potential disruption in market competition.
Seven other states have pending applications and others are hinting at applying. You can keep an eye on the process here.