4 Ways to Boost Your MLR Waiver Request's Chances

In mid-February the Centers for Medicaid & Medicare Services wrapped up its work on the 2011 medical loss ratio waiver requests by denying Wisconsin's waiver request and partially granting North Carolina's.

The MLR, mandated by the Patient Protection and Affordable Care Act, requires that health insurers spend no more than 20% of their annual premium dollars for individual and small group policies on administrative expenses beginning in 2011. Large groups are restricted to 15%. Plans that don't meet the MLR standard must provide a rebate to their customers.

There's big money involved—about $323 million in the first year alone—according to federal officials. Insurers are expected to pay the first round of rebates by due to be paid by August 1st.

At the behest of health insurers, several states took a stab at getting the MLR requirement delayed or reduced to give payers time to adjust to the new MLR reality. In case you're keeping track, here's the scorecard:

• Only 17 states and Guam filed MLR waiver requests in 2011
• CMS granted waiver requests for Georgia, Iowa, Kentucky, Maine, Nevada, New Hampshire and North Carolina.
• It denied waivers for Guam and Delaware, Florida, Indiana, Kansas, Louisiana, Michigan, Oklahoma, North Dakota, Texas and Wisconsin.

Over the course of writing several news stories about the MLR I've had the chance to review all of the waiver applications. With the 2012 waiver application season beginning April 1, I thought now would be a good time to offer some advice to state and health plan officials on how to develop a strong case for an MLR waiver:

1. Make sure insurers want/need an MLR adjustment.
When CMS turned down North Dakota's waiver application, it quoted a letter from the state's dominant insurer, Blue Cross Blue Shield of North Dakota, asking the insurance department to withdraw its waiver request.

2. Provide real proof that the MLR will destabilize the individual market.
CMS hears this one a lot. In denying Florida's waiver CMS officials noted that with more than 20 carriers, the state had a very competitive individual health insurance market that would be just fine.  Here's the kicker: Most of the insurers in the state already meet the new MLR standards.

3. Don't exaggerate the effects of the MLR.
Lots of states have fretted that the new MLR requirements would force insurers to leave their state. Some even named names. But if you plan to use this reason to win a waiver, make sure your case is solid. The problem is the information can be easily checked.

Wisconsin officials contended that two carriers left the market because of the MLR standards. CMS reviewed the withdrawal letters and noted that the carriers had fewer than 1,000 lives and wouldn't come even be subject to the new requirements.

4.  Concerns about brokers and agents are legitimate, but there is more to consider.
Most states contend that the MLR is squeezing broker commissions and jobs, and then they submit some supporting comments from brokerage firms. That's not the way to go.

In denying Delaware's waiver application, CMS noted that eight out of nine Delaware issuers that reported data to the National Association of Health Insurance Underwriters didn't reduce broker commissions between 2010 and 2011.

And keep in mind that the CMS standard is that consumers must simply have adequate access to brokers and agents. Just because commissions fall and jobs disappear doesn't mean access changes.

By the way, broker commissions may not be an issue much longer. In Congress the MLR is about as popular as the Independent Payment Advisory Board. House members have held a series of hearings about the MLR's negative effect on broker jobs and commissions. At issue is the inclusion of the fees in the 15% to 20% non-claims or administrative costs category. Brokers have lobbied hard to get Congress to step in and make the change and two bills, HR 1206 and S 2068 will do just that.

So now it's on to the 2012 requests, which should begin arriving at CMS sometime after April 1. Most states contacted by HealthLeaders Media said it was too early to release any information on a potential waiver request, but I'll be keeping an eye on all those states during the next round.