HHS’s bellwether decision of last week to grant the State of Maine a three-year waiver from the medical loss ratio provision of the ACA may lead to new efforts by insurers across the country to persuade states to demand similar waivers.
The HHS decision on Maine was not unexpected. The ACA language clearly allows for waivers when imposition of the MLR 80/85 percent threshold penalties would lead to disruption of a state’s insurance market. Maine, a state with very few major employers, has a higher than average percentage of small group and individual policies which typically provide higher out-of-pocket costs—and consequently higher administrative percentages. HealthMarkets, one of the two dominant insurers in Maine, had threatened to abandon the state’s individual market unless a waiver was granted. (According to a Bloomberg report, HealthMarkets, which is majority-owned by two large investor funds, was recently sued by the City of Los Angeles for selling policies with provisions that allegedly effectively eliminated needed coverage.)
Three other states (Kentucky, New Hampshire, and Nevada) have already filed waiver requests with HHS, and an additional eleven states are reported to be preparing waiver requests.
Almost certainly, every insurer with significant business in the small group and individual markets will be eying the Maine waiver decision with a view to applying pressure to those state insurance regulators who are not yet preparing waiver requests. While Maine appears to have had an unusually strong case for a waiver, the absence in the ACA of any specific measures for “market disruption” may make it difficult for HHS to reject such requests.