The Centers for Medicare & Medicaid Services denied on Thursday Florida's medical loss ratio waiver request to allow health insurers more time to meet new MLR standards. CMS rejected Florida's argument that meeting the new 80% requirement would destabilize the state's individual market and cause insurers to withdraw.
In the waiver request filed with CMS in March 2011, Florida officials asked for an adjustment of the MLR standard to 68%, 72%, and 76% for 2011, 2012, and 2013, respectively.
At issue is a requirement in the Patient Protection and 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 that 80 cents to 85 cents of every premium dollar is spent on patient medical care.
Health insurers that don't meet the MLR requirement will have to pay a rebate to their members. That's money insurers are anxious to hold onto, so they have appealed to their state departments of insurance to request state waivers to delay implementation of the MLR requirement.
Steve Larsen, director of the CMS Center for Consumer Information and Insurance Oversight, noted in a press conference that with more than 20 carriers Florida has a very competitive individual health insurance market and that the state provided no evidence that meeting the 80% standard would create a hardship for the insurers.
"Most of them already meet that standard and the ones that don't are sufficiently profitable to provide rebate payments," he said.
Larsen also took issue with Florida's contention that four health insurance providers will leave the state if the 80% MLR rate was upheld. He noted that based on enrollment, none of the insurers would even be subject to the MLR rebate requirement in the first place.
"Most insurers in the state have told us that they will be adapting their business models and pricing to the 80% MLR so consumers will receive a better value for their premium dollar," Larsen said.
The Florida waiver application drew early criticism for its lack of substance. Citi analyst Carl MacDonald said in a March report "in our view, Florida's minimum MLR waiver request is pretty weak, and we don't think it's likely that the waiver request will be granted, mainly because the state didn't present a real convincing argument that the individual market will be meaningfully disrupted."
Larsen made a point of mentioning the "unprecedented level of public comment that was uniformly in opposition to the adjustment."
State officials, who now have 10 days to appeal the CMS decision, declined to reveal if they will continue to pursue the waiver. "We are not going to make that decision until we have had time to review and evaluate the letter," Jack McDermott, spokesperson for the Florida Office of Insurance Regulation, told HealthLeaders Media in an e-mail exchange.
State politics may favor an appeal. Healthcare reform is unpopular in the state and Gov. Rick Scott has declined to implement provisions of the act.
Florida is one of 17 states have filed MLR waiver requests. CMS has granted waivers to Georgia, Iowa, Kentucky, Maine, New Hampshire and Nevada. It denied waivers for Delaware, Florida, Indiana, Louisiana and North Dakota. Waiver decisions for Kansas, Michigan, Oklahoma, and Texas are pending. North Carolina and Wisconsin are waiting to hear if their applications are complete so the review process can begin.
See also:
4 States Await Word on MLR Waiver Requests
Understanding MLR Waiver Requests
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
