Understanding MLR Waiver Requests

In its 10-page reply to North Dakota's insurance commissioner, HHS noted that the two insurers that suggested they would leave the state unless they received a reprieve from the MLR requirement already met the 80% threshold and wouldn't be subject to issuing rebates.

HHS also 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. "We see no evidence that insurers are in risk of leaving the North Dakota market," HHS concluded in denying the waiver request.

In addition to North Dakota, HHS has completed its review of waiver applications from Iowa, Kentucky, Maine, Nevada, and New Hampshire. HHS agreed to those requests, with some modifications:

• Iowa. Insurance companies will have an additional two years – until 2013 – to hit the 80% MLR standard. Incremental targets are 67% for 2011 and 75% for 2012. HHS was worried that three small issuers could owe rebates in 2011 and would leave the Iowa market. Golden Rule, Coventry and American Republic have MLRs of between 48% and 68%, pay high broker commissions and need more time to adjust their business models.

• Kentucky. Insurers received a one-year reprieve. They must achieve a 75% MLR standard for 2011 and meet the required 80% level in 2012. Anthem, the dominant insurer, said it would adjust its business model to meet the 80% standard. Humana and Golden Rule have MLRs well below 80% while Time operates at a loss. High agent commissions also played a role in HHS's decision to grant a modified waiver.