Louisiana Asks for Reconsideration of Medical Loss Ratio Waiver Denial

Louisiana Insurance Commissioner Jim Donelon is requesting the U.S. Department of Health and Human Services (HHS) to reconsider its denial of the medical loss ratio (MLR) waiver that the state requested earlier this year.

The MLR is a requirement of the Patient Protection and Affordable Care Act (PPACA) which requires that health insurance companies spend 80 percent to 85 percent of premiums on actual medical services and the balance on other costs.

The waiver, which sought to phase in the 80 percent target for individual policies (the only ones eligible for such a waiver under PPACA) over three years, was denied on Nov. 27, 2011.

Donelon cites the lack of competition in Louisiana’s health market due to the fact that there is one dominant company in the state as the primary reason for reconsideration of the denial.

“While that company services its insureds in an exemplary fashion, and employs over 1,900 Louisiana citizens statewide, preserving competition is essential in order to afford consumers protection through competition. I truly believe that the best way to control health insurance costs is through competition in the private sector,” Donelon said in a statement released by the insurance department.

An integral part of competition in the private sector is provided by life and health insurance agents who have the ability to do comparison shopping for their policy holders at a cost of under 5 percent of the premium, the department noted.

If a waiver is not granted to companies competing with the dominant carrier, Donelon fears those companies will be forced to squeeze the agents out of the process and as a result lead to a single-payer system, which he believes is not in America’s best interest.

On Nov. 22, the National Association of Insurance Commissioners (NAIC) adopted a resolution urging Congress and HHS to use their respective authorities to preserve consumer access to insurance agents and brokers by adjusting the MLR component of PPACA to accommodate the essential service provided by producers in the health insurance market.

In Louisiana four of the top nine health insurance providers with more than 1,000 individual policies in force would be better able to continue to pay up to 5 percent agent commission for the three-year period of phase in of the PPACA required 80 percent MLR.

The waiver reconsideration letter asks HSS to weigh the effects of MLR on these smaller companies, the individual life and health agents, and on competition in the Louisiana health insurance market as a whole.

Source: Louisiana Department of Insurance

Topics Profit Loss Agencies Louisiana