Oklahoma Commissioner Disappointed in MLR Waiver Denial
Oklahoma’s top insurance regulator believes the medical insurance market is headed for “disruption” as a result of the medical loss ratio (MLR) component of federal health insurance reform.
After Oklahoma’s request for a waiver of the MLR requirement was denied by the U.S. Department of Health and Human Services, Insurance Commissioner John D. Doak expressed his disappointment in an announcement released by the Oklahoma Insurance Department.
“This decision could lead to a massive disruption of our insurance markets in Oklahoma,” Doak said.
One Oklahoma state lawmaker, however, says the denial is good news for consumers. State Sen. Tom Adelson, D-Tulsa, said the insurance department’s request for a waiver shows it is more interested in protecting the insurance industry than Oklahoma citizens.
The insurance department is “supposed to regulate the insurance industry and protect Oklahoma consumers. It appears as though their top priority is protecting the industry they’re supposed to regulate,” Adelson said in a news release.
The MLR determines the percentage of premium dollars that an insurer may spend on actual health care, versus the amount spent on administration and profits. The Patient Protection and Affordable Care Act (PPACA) set an 80 percent minimum MLR for companies in the individual and small-group health insurance markets and an 85 percent MLR for large-group plans.
Doak and the OID sought a gradual phase-in of the 80 percent ratio in the individual market only. No changes were requested by Oklahoma for the small-group and large-group markets.
Doak and the OID requested that insurers be required to meet a 65 percent MLR for 2011, 70 percent in 2012 and 75 percent in 2013, with full compliance with the 80-percent standard for individual policies by the time the bulk of PPACA’s provisions are fully in force in 2014.
“We asked for a decision that would first and foremost do no harm to the current markets,” said Mike Rhoads, deputy commissioner of Life and Health Insurance at OID. “We wanted to keep coverage available, to keep all carriers large and small in our individual market.”
While it may be easier for large carriers to meet MLR requirements, Doak and others believe that smaller companies will have a harder time meeting the ratio requirement.
Insurance companies that fail to meet the MLR requirement must issue rebates to their customers under federal law.
HHS officials predicted that the agency’s denial of Oklahoma’s request could result in state residents receiving rebates that add up to as much as $13 million, according to an Associated Press report. The $13 million estimate was based on data from 2010 and could be smaller, depending on how much closer companies moved to the 80 percent mark in 2011.
HHS’ analysis of Oklahoma’s individual insurance market found no evidence that any carriers would leave the state, the AP reported.
Adelson said at least one insurance company in Oklahoma is “spending only 45 cents of every premium dollar on medical care, and another only 58 cents.” He said Doak’s waiver request is the latest in a series of insurance department decisions that place the multi-million dollar profits of insurers above consumer protection.
“Oklahoma law mandates that the Insurance Commissioner’s job is to protect the public by regulating companies so that policyholders aren’t charged excessive rates,” Adelson said. “Instead, the commission is protecting insurance company profits at the expense of Oklahoma consumers.”
Not Reliable
Doak believes that the MLR isn’t a reliable means of determining an insurance company’s effectiveness to consumers. Some Oklahoma companies that will struggle to meet the MLR requirements are nonetheless price-competitive with other companies that do or will meet the MLR threshold, according to Doak.
“MLR is an arbitrary and superficial means of judging the worth of an insurance company to its policyholders,” Doak said. “Just because one company is able to attribute a smaller percentage of its operating costs to each policyholder does not necessarily mean its policyholders received a greater value for their dollar.”