North Carolina Wins Delay on Medical Loss Ratio
Federal regulators last week allowed North Carolina insurers a one-year delay in meeting a benchmark requiring that more of each health insurance premium dollar to go toward medical services and less toward overhead and bonuses.
The decision by the U.S. Department of Health and Human Services means consumers whose health insurance company failed in 2011 to limit profits, salaries, and other administrative costs to no more than 20 percent of premiums will not receive the rebates they could have gotten this summer.
Insurers are required by the federal health overhaul law to spend at least 80 percent on medical care, a mark called the “medical-loss ratio.”
“They’re among the most important consumer protections” in the health overhaul law by making sure more of their premium dollars go toward services delivered, said Steve Larsen, director of the federal agency’s Center for Consumer Information and Insurance Oversight. “We know that insurers have already begun adjusting their pricing.”
North Carolina Insurance Commissioner Wayne Goodwin, a Democrat, asked the Obama Administration in September for a three-year, graduated delay in reaching the 80 percent mark. The state asked for an adjustment to 72 percent in 2011, 74 percent in 2012, and 76 percent in 2013.
The federal agency said it would instead grant an adjustment of 75 percent for 2011 only, with the 80 percent standard to apply beginning this year.
The short-term adjustment allows a balance between preserving competition for health insurance, holding insurers accountable and providing rebates for many policyholders, Goodwin’s office said.
If regulators had stuck with federal standards, it could have meant $12 million in rebates for more than 58,000 North Carolina residents who buy their own health insurance or worked for small employers who provide coverage. The estimate is based on data from 2010 and could be smaller, depending on how much closer companies moved to the 80 percent mark last year.
Customers of Blue Cross Blue Shield of North Carolina would not be eligible for rebates because it exceeded the 80 percent standard. Blue Cross spent 86 cents on the dollar on member healthcare in 2010, spokesman Lew Borman said.
North Carolina’s highly concentrated market of just nine insurers needed some leeway to keep from driving some out of the state, the federal agency said. Blue Cross has more than 80 percent of the market for coverage sold to individuals and small businesses.
The federal agency says its delay in the requirement in the federal health overhaul law is to give smaller issuers time to compete with Blue Cross without the pressure of cutting their marketing expenses.
The waiver supports Goodwin’s “arguments that a short delay protects consumers while not disrupting” the state’s insurance market, said consumer advocate Adam Searing, who directs the North Carolina Health Access Coalition.
North Carolina is one of 17 states that applied for waivers to the 80-percent rule. Seven states have been granted a waiver, although in the case of North Carolina and most of the others HHS did not give the state as much as it wanted.
Wisconsin last week joined nine other states whose requests were rejected as unnecessary to protect consumers.
The states granted a waiver include four with Republican governors: Maine, Nevada, Georgia and Iowa. The states denied include one with a Democratic governor, Delaware. Texas and Florida were denied waivers. Their governors, Rick Perry and Rick Scott have been vocal opponents of the health care overhaul law.