Friday, September 24, 2010


Having originally hoped to publish its proposed PPACA medical loss ratio regulations by the end of May, then having slid the date, first to the end of July, then to mid-August, and finally to the “end of summer,” the National Association of Insurance Commissioners released its proposal late yesterday, September 23, the day of the autumn equinox.

Insurers and their lobbyists were quick to complain about the proposed regulations, although they must have been relieved to see that they had succeeded in their goal of getting almost all federal and state taxes and fees excluded from the MLR computation. The NAIC followed a “letter of the law” approach in interpreting the PPACA language exactly as written, rather than accepting the claimed intent of the law’s primary Congressional drafters that only new PPACA-specific taxes and fees should be excluded. The impact of the NAIC interpretation is significant, especially for investor-owned insurers: excluding all taxes but those on investment income will boost their MLRs by some two or three percentage points.

The day before the release of the NAIC’s proposal, three dozen of the state insurance commissioners met with President Obama, HHS Secretary Sebelius, and other administration officials. The key issue: whether the new MLR rules could be gradually phased in, rather than being fully implemented on January 1, 2011. Although PPACA allows the HHS Secretary to grant temporary waivers to states where requiring health plans to meet an 80 percent MLR could result in disruption of the individual market, many NAIC members would prefer much greater flexibility for both the individual and small group markets.

So far, only Maine and Iowa have formally requested waivers of the individual market requirement, but other states are expected to follow. PPACA does not allow for waivers of the 80 percent threshold in the small group market (or the 85 percent threshold in the large group market), and some state commissioners are anticipating that insurers currently offering “affordable” coverage with substantial deductibles and other consumer contributions may be forced to drop such policies (which typically result in lower MLRs) or leave the market altogether, leading their policyholders with higher premiums or problems getting insurance. However, the administration has so far given no indication of such flexibility and clearly is unwilling to start weakening the reform law.

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