Feds reject Texas request for MLR waiver

Texas became the ninth state for which the Obama administration rejected a temporary waiver of the insurance market requirements in the 2010 federal healthcare overhaul.

The state had sought a temporary adjustment of the Patient Protection and Affordable Care Act's medical-loss ratio requirement that insurance plans devote a minimum percentage of their budgets to pay for the care of enrollees. Insurance companies must spend between 80% and 85% of premium dollars on medical care or healthcare quality improvement, rather than on overhead costs. Insurance plans that did not meet the requirement in 2011 must begin to provide rebates to their customers in 2012.

Texas requested an adjustment of the standard to 71% last year, 74% in 2012 and 77% in 2013.

The law allows for waivers if there is a “reasonable likelihood” that adherence to the insurance spending ratio would “destabilize” a state's health insurance market by driving companies out of business or sharply cutting into their profits.

“[W]e have determined that the evidence presented does not establish a reasonable likelihood that the application of an 80 percent MLR standard will destabilize Texas' individual market,” Steven Larsen, director of the Consumer Center for Information and Insurance Oversight (PDF), wrote in a Jan. 27 letter to the Texas insurance commissioner. “Consequently, we have determined not to adjust the MLR standard in Texas' individual market and, thereby, ensure that consumers receive the benefit of this provision of the Affordable Care Act.”

“We've seen issuers across the country changing their business practices to meet that standard; practically speaking, this means lower premiums for consumers,” Gary Cohen, acting director of oversight at CCIIO, said in a call with reporters. “This is true in Texas as well.”

Six states have had at least part of their waivers approved. Decisions on waiver requests both Wisconsin and North Carolina are expected within the next few months.