Georgia Seeks Waiver from Medical Loss Ratio Rule

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 (MLR) rule for 2011, 2012 and 2013. That rule controls the proportion health insurers spend on administration versus medical care.

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.

Hudgens said applying the 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 Department of Health and Human Services (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 MLR 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.

The NAIC, of which Hudgens is a member, is reconsidering the rule.

Hudgens said he believes the federal law is unconstitutional and supports the lawsuits challenging the new rules by Georgia and other states.

Topics Profit Loss Georgia