Randi Reichel, an attorney who spoke on behalf of the health plan industry, said MLR requirements "impose an unprecedented new federal cap on the administrative costs of health plans, strictly micro-managing their ability to invest in new initiatives and innovations to benefit their enrollees."
Reichel added that because the MLR provision went into effect in January 2011 health plans and states didn't have a transition period to adjust to the new requirement. She noted that 12 states have submitted MLR waiver requests and three -- Maine, Nevada and New Hampshire -? have been approved with some modifications.
She contended that the MLR could limit consumer access to popular high-deductible health plans. "These lower-cost benefit options are not necessarily less costly to administer on a per-enrollee basis. They will have lower loss ratios and a greater likelihood of being noncompliant with the MLR rule."
Scott Harrington, a professor at the Wharton School at the University of Pennsylvania, said the MLR represents a "significant move toward government micromanagement of health insurance." He testified that the MLR provisions will "distort insurers' incentives for legitimate business decisions, destabilize some states' markets, and could reduce incentives for certain beneficial innovations in coverage and payment."
Harrington agreed with earlier testimony by Randi Reichel that the MLR requirement could "discourage some coverage designs that could lower premiums but involve relatively high nonmedical costs in relation to insured benefits, such as certain high-deductible plans. They could discourage potential innovations in coverage design and managed care that might require a lower MLR in conjunction with lower premiums and better value for buyers. They could cause some plans to contract with narrower provider networks and/or enter into arrangements shifting more administration to providers."