State insurance chief wants federal waiver

Posted July 16, 2010, at 1:50 a.m.

AUGUSTA, Maine — Maine Insurance Superintendent Mila Kofman is asking the Obama administration to waive a provision of the health reform law that requires 80 percent of health insurance premiums be spent on patient care.

“It’s really important to make sure that the options that Mainers currently have stay in place,” she said Thursday. “That’s why I sought the waiver.”

The new federal health reform law, the Affordable Care Act, requires all health insurers have what is called a medical loss ratio, or MLR, requirement that 80 percent of premiums be used to provide care to patients, while Maine law requires a 65 percent ratio.

Kofman, in her waiver request, said the increase could lead one of the three insurers in the individual market leaving the state.

“In its filings with the Securities and Exchange Commission, one insurer has indicated its intent to pull out of individual insurance markets,” she wrote. “Based on preliminary discussions I had with the insurer, the company could continue to operate in the Maine market in compliance with our current MLR standard, but would probably need to withdraw from this market if the minimum loss ratio requirement were increased.”

That insurer is HealthMarkets Inc., which operates in Maine under the name MegaLife Insurance. It writes about 13,000 policies, about one-third of all individual health policies in the state.

“I am concerned that they will choose not to do business here,” Kofman said. “I want to make sure Mainers continue to have at least the same choices they have now until 2014.”

Anthem is the largest provider of individual health policies in the state and is a subsidiary of national health insurer WellPoint Inc. The public-private partnership of the Dirigo Health Agency and Harvard Pilgrim has a capped enrollment and has fewer than 8,000 policies in effect.

She said the MegaLife plans are specialized, catastrophic health insurance plans, which have lower claims costs by their nature. She said such plans are needed to provide coverage to Mainers until more comprehensive plans with affordable care subsidies become available under the new law.

Kofman argues, in her letter to Health and Human Services Secretary Kathleen Sibelius, that Maine’s standard is not “substantially” lower than the new federal standard. That is because Maine law does not allow taxes and other expenses, including quality improvement costs, to be part of the equation and that only paid medical claims count in figuring medical expenses under the MLR.

The waiver request was filed July 1, and there has been no response from DHHS.

The health reform law fully takes effect in 2014 and individuals will have several choices for coverage, from a greatly expanded Medicaid program to state and regional health exchanges that will offer health insurance options.

Kofman said the National Association of Insurance Commissioners is working with the Obama administration to develop the federal regulations for the medical loss ratio. But the timetable to develop the regulations is based on 2014 when all of the provisions of the new law are fully in effect.

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