Federal officials are in the final stages of reviewing applications from Indiana, Florida, Louisiana and Michigan to determine if their medical loss ratio waiver requests will be approved.
At issue is a requirement of the Affordable Care Act that health insurers spend no more than 15% to 20% of their premium dollars on administrative expenses. The idea is to limit administrative spending so health plan members get more healthcare bang for their premium buck.
Health insurers that don't meet the MLR requirement will have to pay a rebate to their members. The Department of Health and Human Services estimates that 9 million members could be eligible to share rebates worth as much as $1.4 billion. That's money insurers aren't anxious to part with, so they have appealed to their state departments of insurance to request state waivers to delay implementation of the MLR requirement.
So far 17 states have filed waiver requests. The applications for seven states have been approved, including Georgia and Iowa. Applications from Delaware and North Dakota were denied. Five states? Kansas, North Carolina, Oklahoma, Texas and Wisconsin—are waiting to hear if their applications are complete so the review process can begin.
HHS officials have said they expect to receive a total of around 20 MLR waiver applications, but time is running out. The rebate requirement goes into effect on Jan. 1, 2012 for any state that hasn't already been granted a waiver.