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Florida patient advocacy group calls for rejection of request by state to ‘phase in’ medical loss ratio

A patient advocacy group is asking the feds to not grant insurance companies in Florida exemption from profit caps mandated by federal law. Florida’s insurance commissioner recently asked for a waiver of the mandate.

Florida CHAIN (Community Health Action Information Network) has asked the U.S. Department of Health and Human Services “to reject a request by Florida’s Insurance Commissioner to grant insurance companies a reprieve from new Affordable Care Act requirements intended to ensure that consumers get value for the health insurance premiums they pay.”

Yesterday, the 10-day comment period ended.

According to the group’s press release:

Starting this year, insurers must meet minimum “medical loss ratio” requirements. In particular, insurers in both the individual and small group health insurance markets must spend at least 80 percent of total premiums they receive on patient care and quality improvement activities. This in turn limits the amount they can divert to executive salaries, overhead and profit. Insurers that fail to meet this standard must issue rebates to their policyholders.

However, if a state can prove that imposing the requirement now is likely to result in an exodus of insurers, federal regulations allow HHS to adjust the requirement for up to 3 years. (This adjustment may only be requested for the individual market, where consumers purchase their own coverage directly rather than obtaining it through an employer.)

After first making an ineligible request for a full waiver of the 80% standard, Florida asked to phase in the medical loss ratio over 3 years. If Florida’s request is approved, insurers stand to gain an estimated $140 million in rebates that would be owed to consumers. In addition, a key incentive for insurers to keep constantly increasing premiums down would be eliminated.

Insurance companies and Republicans in the state Legislature have been opposed to a medical loss ratio — mostly because it would affect the profits that insurance companies can hold on to. The ratios require that most of the money collected by premiums (or public funds, in this case) are spent on providing actual health care. GOPers in the state Legislature have said this mandate from the feds is an example of them “dictating unilateral terms of surrender” and “commandeering” the state’s budget.

In an effort to prove that this mandate will run insurance companies out of Florida, two small insurance companies in the state have actually decided to close their doors.

The Hill reports:

“On October 24, 2011 the Office received notification from American Enterprise Group Inc. that two of its subsidiaries will ‘exit the state’ for the purposes of individually underwritten comprehensive major medical business,” the Florida Office of Insurance Regulation said in a statement. “In a letter to the Office, American Enterprise specifically cites a ‘change in the regulatory environment’ including the Affordable Care Act’s imposition of the minimum medical loss ratios (MLR) as reasons for this decision.”

The two subsidiaries that are pulling out of Florida — American Republic Insurance Co. and World Insurance Co. — underwrite 2,615 policies in the state, according to the Florida Office of Insurance Regulation. That’s about one-third of 1 percent of the 800,000 or so individual policies issued in Florida, according to the state’s waiver petition.

Florida has asked the federal Department of Health and Human Services for permission to phase in the medical loss ratio over three years: 68 percent for 2011, 72 percent for 2012 and 76 percent for 2013.

Laura Goodhue of Florida CHAIN said in a statement that “it’s tragically ironic that the only action taken to-date by a Florida official to implement the Affordable Care Act has been a baseless and transparent effort to side with insurers at the direct expense of consumers.”

“The only way state leaders can hope to back up their claims that the ACA will not dramatically benefit Floridians is to directly block Floridians from receiving those benefits,” she said.

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