Federal regulators asked to allow medical loss ratio phase-in

Health plans in the individual market should be allowed several years to comply with the health spending requirements of the new health reform law, state insurance commissioners told the Obama administration Wednesday. 

Members of the National Association of Insurance Commissioners met with Obama administration officials for about an hour Wednesday to discuss provisions of the law, particularly the medical loss ratio. Insurance commissioners from 32 states, two territories and the District of Columbia met with the Health and Human Services Secretary Kathleen Sebelius, Labor Secretary Hilda Solis and White House Office of Health Reform Director Nancy-Ann DeParle, with President Obama stopping by half-way through.

“We have been discussing globally that this is something that we would encourage them to consider, is some type of phase-in process,” said West Virginia Insurance Commissioner and NAIC President Jane Cline.

“The law does allow for a phase-in on an individual state-by-state basis,” added Kansas Insurance Commissioner Sandy Praeger. “We have made the point that there might be some general categories that they might want to consider as a more across-the-board sort of phased-in approach, because I can’t imagine that (Sebelius) is going to want to be spending time at HHS dealing with each individual state applying for some sort of phase-in latitude. It would be easier I think on them if there … are some areas where they think flexibility is appropriate.”

Praeger in particular advocated for flexibility in how agent commissions are accounted for, since they often involve multi-year legal contracts.

Iowa Insurance Commissioner Susan Voss said her state requested a waiver from the medical loss ratio on Tuesday, joining Maine. Several other states are also considering asking for a waiver, she said.

Florida Insurance Commissioner Kevin McCarty said he is holding an evidentiary hearing Friday to gather oral and written testimony and affidavits from insurance companies as to how the medical loss ratio requirement would disrupt the market. He said Jay Angoff, the director of the Office of Consumer Information at HHS, has requested that insurers make their case for a phase in.

“The guidance I got … is that we have to have more than this amorphous displeasure with the current structure,” McCarty said. 

The commissioners also reiterated that the NAIC is moving forward with a broad interpretation of the taxes – all federal and state taxes minus those on investment income – to be deducted from premiums when calculating the ratio. The chairmen of the House and Senate committees of jurisdiction over health care have asked for a narrower definition, leading in effect to a higher ratio, but the state commissioners said the administration did not bring up the issue on Wednesday.