With a significant federal health insurance regulation taking effect Saturday, the fate of Maine’s request for an exemption remains uncertain.
Although several others are expected to follow suit, Maine is the only state so far to have filed for an exemption to an Affordable Care Act regulation that requires health insurance companies to maintain a minimum “medical loss ratio” of 80 percent. That means the companies must spend an average of at least 80 cents of every premium dollar for health care services delivered to policyholders. The remaining 20 cents can be used for operational expenses such as administration and marketing as well as for boosting profits.
The current minimum medical loss ratio in Maine is 65 percent, and Maine Insurance Superintendent Mila Kofman, a strong supporter of national health care reform, would like to keep it that way for now.
In a July 1 letter to Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services, Kofman expressed concern that implementing the 80 percent medical loss ratio here “would have a serious destabilizing effect in our individual [insurance] market.” With only two companies competing effectively for the Maine individual market, Kofman said in her letter, one had already indicated its intent to pull out of the state if the higher loss ratio were imposed.
Individual insurance — coverage sold to nongroup individuals as opposed to employee or other groups — is offered by only a handful of companies in Maine. Anthem Blue Cross and Blue Shield, a subsidiary of Indiana-based insurance giant Wellpoint, covers about 18,000 individuals. Texas-based MegaLife covers an additional 13,000. The public-private DirigoChoice program covers about 6,000 nongroup individuals, but the future of that politically contentious program is uncertain. Aetna and Harvard Pilgrim sell a negligible number of individual policies — 17 and two, respectively, according to November statistics provided by the state Bureau of Insurance.
It was MegaLife that threatened to leave Maine if the new loss ratio is imposed.
“Based on preliminary discussions I had with [MegaLife],” Kofman wrote in her July letter, “the company … would probably need to withdraw from this market if the minimum loss ratio requirement were increased.”
Maine filed a formal waiver request on Dec. 16, about two weeks after HHS released detailed waiver guidelines, Kofman said Friday. A Washington Post story on Thursday said no other states have filed yet, but Kofman expects several will in the coming weeks and months.
The waiver request demands a great deal of insurance company information, she said.
“Maine is lucky; we collect a lot of [insurance company] data so it was easily accessible,” she said, but in other states the process will take longer.
In November, Sen. Olympia Snowe added her support to Kofman’s waiver request, reiterating the concern about losing what little competition exists for Maine’s individual insurance market. Still, there has been no answer from Washington, D.C. Snowe could not be reached Friday for comment.
Kofman said Friday she is not discouraged that HHS has not responded to the filing.
“They have only had our request for a couple of weeks and it is the holiday season,” she said. “I am certain that if they need additional information or have questions about the application, they will work closely with us in evaluating the request.”
The new minimum medical loss ratio will be factored into insurers’ monthly rates, and companies that do not spend enough on health care services will have to refund the difference to their customers. States can request adjustments for the next three years, if they can demonstrate that the 80 percent medical loss ration is likely to undermine competition in their individual markets.
By 2014, when all Americans will be required to purchase coverage, companies’ ability to comply with the increased loss ratio is not expected to pose a hardship on the companies or the consumers they serve.