The Obama administration has turned down requests by Indiana and Louisiana for exemption from a provision in President Obama’s health care law that restricts how much insurers can spend on overhead.
The two states were seeking waivers from the requirement known as the “medical loss ratio,” or MLR, that insurers spend no more than 15 to 20 percent on overhead costs, with the rest going to patient care. Officials with the Department of Health and Human Services (HHS) said neither application demonstrated an immediate need to be excused from the requirement.
“We have determined that the evidence presented does not establish a reasonable likelihood that the application of the 80 percent MLR standard will destabilize the Indiana individual market,” wrote Steven Larsen, a deputy administrator for the Center for Medicare and Medicaid Services, in a letter to Indiana Commissioner of Insurance Stephen Robertson.
“Consequently, we have determined not to adjust the MLR standard in the Indiana individual market and, thereby, ensure that consumers receive the full benefit of this provision of the Affordable Care Act,” he wrote.
Intended to reduce administrative bloat and keep companies from charging too much for premiums, the MLR went into effect on January 1. Insurers that don’t meet the ratio must provide rebates for their customers beginning in 2012.
Indiana requested exemptions until 2014 for new insurers in the individual market and permanent waivers of the 80 percent MLR for individual and small-group insurers offering certain “consumer-driven” health plans, while Louisiana requested a lower minimum amount that individual market health plans must devote to patient care.
Of the 17 states that have filed waivers requests so far, HHS has granted six applications and rejected four, with seven applications still pending.