A key waiver provision of the Patient Protection and Affordable Care Act would be amended under a medical loss ratio (MLR) bill scheduled for mark-up Thursday before the House Energy and Commerce Committee.
That provision of HR 1206 would give states the final say on MLR waiver requests. MLR waiver authority now rests with the Centers for Medicare & Medicaid Services.
The ACA requires insurers to spend no more than 20% of premium payments collected for the individual and small group market on administrative expenses such as salaries, overhead, and markets. The remainder, up to 80% of premium dollars, must be spent on direct patient care and efforts to improve care quality.
Insurers that fail to meet that standard are required to make financial rebates to their members.
This year insurers rebated $1.1 billion to 12.8 million members.
A waiver process permits individual states to apply for an MLR exception (an implementation delay or reduction) if meeting the 80/20 standard could destabilize the state's individual and small group market. Only 17 states took that step in 2011. CMS has granted waivers for seven states and denied waivers for 10.
Supporters of the waiver move contend that states know more about their markets than federal government analysts sitting in Washington, DC.
Critics contend that the shift to state approval for MLR waivers will create a patchwork system that will take money out of the pockets of consumers and give it to insurers. They point to states like Florida, whose waiver application drew criticism for its lack of substance. Its initial application and appeal were both denied by CMS.
In an e-mail exchange, Rep. Henry Waxman (D-CA) noted that "if the 10 states that could not substantiate their waiver requests had actually gotten a waiver, premiums would have been $360 million higher for 3.8 million consumers in those states."
The waiver provision is discounted as a "totally political provision with no serious policy considerations behind it, " Ethan Rome, executive director of the advocacy group Health Care for America Now, told HealthLeaders Media. "This is not a case of state versus federal rights. Most state insurance offices don't have the capacity to do the necessary market analysis."
What seems to be lost amid a lot of political rhetoric is that health insurers have been taking the steps to adjust their company operations to reflect the new MLR reality. Still, there's no mistaking that they don't favor the MLR rule, which America's Health Insurance Plans says "completely ignores" the real driver of healthcare expenses—soaring medical costs.
The waiver provision hasn't received as much attention as the section of HR 1206 that would amend the PPACA MLR rule to exclude broker and agent fees and commissions from administrative expense calculations. That industry and political battle has been raging for more than a year.
Supporters of the exclusion, such as the National Association of Health Underwriters, say that agents and brokers face "a desperate economic situation" that can be attributed to job losses and lower incomes that it blames on MLR requirements. The group contends that because agents and brokers are mostly self-employed, their commissions shouldn't be considered administrative expenses.
In a committee hearing called to discuss HR 1206 Rep. Waxman noted a study from the nonpartisan Insurance Information Institute that estimates more than 7,000 jobs have been created in the agent and broker field since May 2011.
Others attribute any decline in agent income to industry forces put in motion well before the ACA. Commissions are often based on premiums paid so as premiums increase, so do commissions. Insurers have been working for several years to adjust rapidly increasing commissions.
The Consumers Union estimates that the exclusion of agent and broker fees from administrative expenses could reduce consumer rebates by at least 50%.
Support for HR 1206 generally falls along party lines. Republicans provide the lion's share of support, although about 20 Democrats have signed on as cosponsors of the bill. The mark-up is viewed by some as more theatrics by House Republicans in their continuing effort to discredit healthcare reform.
The bill is expected to easily pass through the committee, although an effort to strip out the waiver provision is expected, according to Tim Jost, a consumer representative on the National Association of Insurance Commissioners and a law professor at Washington & Lee University.
It is doubtful that the House calendar will allow for a full vote on HR 1206 before the November elections.
Neither Rep. Mike Rogers (R-MI) nor Rep. John Barrow (D-GA), the primary sponsors of HR 1206, responded to requests for information.
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
