North Carolina Insurers Still Hoping for Medical Loss Ratio Waiver

By | February 13, 2012

The U.S. Department of Health and Human Services is going overtime as it decides whether to stick with federal standards that could mean $12 million in rebates for more than 58,000 North Carolina residents who buy their own health insurance.

The U.S. Department of Health and Human Services had until last week to decide whether to give North Carolina health insurance companies a waiver from a federal law that requires they take no more than 20 percent of premiums for profits, salaries, and other administrative costs. Insurers are required by the federal health overhaul law to spend at least 80 percent spent on health care.

Federal regulators notified the state last Wednesday that they needed more time to consider the impact on North Carolina’s $1 billion individual health insurance market, but no more than 30 days.

North Carolina Insurance Commissioner Wayne Goodwin, a Democrat, asked the Obama Administration in September for a three-year, graduated delay in reaching the 80 percent mark for the so-called “medical-loss ratio.”

Insurers were required to meet the cost-control mark during their 2011 business year. Companies that fail to meet the 80 percent mark must rebate money to their customers.

Estimates submitted with the state insurance department’s request say customers of Golden Rule Insurance Co., Wellpath Select Inc., and nine smaller companies would be due rebates of about $12.1 million if the ratio isn’t changed. The estimate is based on data from 2010 and could be smaller, depending on how much closer companies moved to the 80 percent mark last year.

Customers of Blue Cross Blue Shield of North Carolina and three smaller insurers would not be eligible for rebates because those companies exceed the 80 percent standard. Blue Cross owned 81 percent of the individual health insurance market in 2010, with nearly 340,000 customers, state regulators said.

That market concentration is behind Goodwin asking the federal agency to allow North Carolina insurers to spend less of their premium dollars on health care costs: 72 percent in 2011, 74 percent in 2012 and 76 percent in 2013, and 80 percent in 2014.

The delay was needed because companies forced to rebate policy owners might shut down in North Carolina, thinning out industry competition, Goodwin said in September. Goodwin was traveling Thursday and unavailable for comment, his spokeswoman said.

That has happened in other states. Aetna, Cigna and two smaller health insurers cited the 80 percent rule as their reasons for leaving the individual health insurance market in Indiana over the past year.

“The hope is to limit the potential for short-term disruption of the health insurance market in North Carolina,” Goodwin said in September.

Though insurers haven’t announced plans to quit doing business in North Carolina, some have stopped trying to round up customers, the state agency said. Wellpath Select, the state’s second largest individual health insurance issuer, is cutting its commissions to the agents and brokers who sell its policies and expects to lose more than 80 percent of its sales, the department said.

“The waiver, we’re not crazy about, but we think the Department of Insurance is taking a balanced approach,” said Adam Linker, a policy analyst for the Health Access Coalition at the North Carolina Justice Center. He credits Goodwin with getting Blue Cross to refund $155 million to more than 215,000 individual policyholders in 2010.

North Carolina is one of 16 states that applied for waivers to the 80-percent rule. Nine requests have been rejected as unnecessary to protect consumers

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