Oklahoma Seeks Waiver on Health Care Insurance MLR Requirement

Oklahoma Insurance Commissioner John Doak is seeking a waiver on a major provision of the federal Patient Protection and Affordable Care Act.

Doak requested an adjustment from the U.S. Department of Health and Human Services to new minimum Medical Loss Ratio (MLR) requirements for individual health insurance policies issued in Oklahoma from 2011 through the year 2014.

Doak has requested that the state be permitted to phase-in those MLR requirements between now and 2014. The commissioner recommends a phase-in of 65 percent for this year, 70 percent in 2012 and 75 percent by 2013.

His letter to U.S. Secretary of Health and Human Services Kathleen Sebelius was accompanied by endorsements from the Independent Insurance Agents of Oklahoma and the Oklahoma State Association of Health Underwriters.

The commissioner believes that phasing-in the MLR requirements over a period of years would preserve competition and consumer choice in Oklahoma by maintaining the viability of smaller insurers and local agents.

Such a waiver would not be unprecedented, but is not guaranteed. Fifteen states or territories have sought similar waivers. Sebelius has approved or partially approved a number of the requests, is still reviewing others, and in late July North Dakota became the first state to have its waiver request rejected.

Under provisions of the federal Patient Protection and Affordable Care Act, states beginning in 2011 are to ensure that 80 percent of individual and small group health insurance premiums are spent toward providing benefits and improving health care quality.

‘A number of small carriers operate in the Oklahoma market,’ Doak said in the Sept. 1 letter to Sebelius.

The commissioner said he considered those small carriers’ requests for a phase-in period, carefully reviewed all Oklahoma carriers’ responses to an OID questionnaire, and weighed input from the producer community before determining that ‘immediate implementation of the MLR requirement will disrupt the individual health insurance market in Oklahoma.’

At issue for insurers nationwide is the federal government’s requirement to include commissions paid to agents and brokers in MLR calculations. That could result in some insurers, particularly smaller carriers, exiting states where the firms find it most difficult to meet the 80 percent MLR requirement.

Doak notes that a July report by the U.S. Government Accountability Office concludes that early experiences in states implementing the MLR requirements suggest insurers are responding to the federal MLR regulations by decreasing broker commissions. This loss of income could drive some agents and brokers away from selling health products or out of the insurance industry, according to the Oklahoma Insurance Department announcement.

Doak campaigned on a platform that included opposition to the new federal health care law.

Oklahoma is among 28 states that have filed lawsuits against the federal government attempting to have the law overturned — a point Doak made clear in his letter to Sebelius.

Source: Oklahoma Insurance Department