Monday, October 18, 2010


Having a-l-m-o-s-t completed the final draft of the medical loss ratio calculation rules for approval by the Department of Human Services (a responsibility delegated by PPACA), the National Association of Insurance Commissioners is now pressing for a more generous waiver policy for the individual market than envisioned by Senate proponents of the MLR requirements.

In an October 13 letter to HHS Secretary Kathleen Sebelius, NAIC officers ask that HHS “give deference to” state regulators’ determinations of whether imposition of the MLR and rebate provisions would destabilize individual markets.” The letter lists a series of factors that state regulators would consider, including possible impact on insurer solvency and the ability of policyholders to find alternate coverage if waivers were not granted. In other words, the NAIC is requesting that HHS grant waivers to states with a minimum of argument. As the letter says, “State regulators are most familiar with local health care and health insurance markets.”

The NAIC letter emphasizes the importance of a smooth transition to fully implemented reform, and points out that while the MLR provision is scheduled for 2011, the major components of PPACA will not be effective until 2014. (The letter fails to note that, starting in 2014, the MLR calculation must be based on a 3-year rolling average, so that even with waivers prior to 2014 it may be impossible for insurers to meet the 80 percent individual market threshold in 2014.)

The underlying threat, of course, is that unless state regulators’ requests for waivers are granted, HHS will become the whipping boy for every individual policy that is canceled, and for every departure of an insurer from a state market. Democratic insurance commissioners may not complain too loudly, but the Republican majority certainly will.

What is Secretary Sebelius likely to do? Given the rapidity with which HHS folded in the face of concerns about mini-med policies, it’s a reasonable bet that the final federal regulations will require HHS to consider state regulators’ determinations, at least through 2014. It’s also likely, given that the MLR provisions become effective in just a few weeks, that the waivers already requested (from Iowa, Maine, and South Carolina) will be quickly granted.

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