Georgia is requesting a waiver from a key element of the federal healthcare overhaul that sets how much of health insurance premiums must be spent on medical care.
Insurance Commissioner Ralph Hudgens said he wants a waiver from the “medical loss ratio” ratio standard for 2011, 2012 and 2013. That rule controls the proportion health insurers spend on administration versus medical care.
He said applying the medical loss ratio (MLR) could destabilize the health insurance market in the state, a situation he wants to avoid.
Maine was recently granted a waiver of the sort Hudgens is seeking.
The MLR requirement is part of the Patient Protection and Affordable Care Act and requires health insurers to spend 80 to 85 percent of premiums on direct care for patients. The intention is to limit the share of premiums that insurers spend on administrative costs and profits, including executive salaries, overhead and marketing.
The Department of Health and Human Services (HHS) decided what costs may be contained in the MLR calculation, adopting most of the recommendations from state insurance regulators as to what should be considered direct medical care costs that fall within the 80 to 85 percent and what costs fall outside of direct care.
HHS, following recommendations by the National Association of Insurance Commissioners (NAIC), classifies agent and broker fees and commissions as non-claims expenses “unless a specific position can be directly correlated with an activity that improves health care quality.
The NAIC, of which Hudgens is a member, has agreed to reconsider the rule that agent and broker commissions can’t be part of the medical direct care portion. That ruling has prompted an outcry from agents and brokers who fear their commissions will be squeezed by insurers looking to trim costs to comply with the overall ratio.
Hudgens said he believes the overhaul is unconstitutional and that he supports the lawsuits challenging the new rules filed by Georgia and other states. But he said he is filing the request for a waiver because the law is still intact and he wants to protect Georgia residents and the state’s insurance market.
Topics Profit Loss Agencies Georgia
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