MLR's determine the amount of money earned from premiums that an insurance company must devote to medical claims and quality improvement efforts. According to the ACA rules, individual and small group insurance plans must have a minimum MLR of 80 percent. Large group plans must have an 85 percent minimum MLR.
HHS has stipulated that states could apply for a waiver "if there is a risk of destabilization of the market" if the MLR rules were implemented, according to an analysis by Avalere Health, a non-profit, non-partisan consulting group. The MLR rules were effective Jan. 1, 2011; the finalized rules added certain deductions that insurance companies could make in determining their MLR and how rebates were to be made.
A total of 10 states have applied for a waiver this year. Six -- Georgia, Iowa, Kentucky, Maine, Nevada and New Hampshire -- were approved. However, Maine's application was the only one approved as written, Jennifer Kowalsky, director of Avalere Health, told Governing. Maine has only two insurance carriers, according to Avalere, and asked for a minimum MLR of 65 percent.
The other five states had their waivers approved, but their MLR's were raised above the originally requested percentage. For example, Nevada requested a 72 percent minimum MLR, but HHS approved 75 percent, according to the letter that the department sent to the state in response to its waiver request, concluding that the 75 percent would be sufficient to offset the effect of the new rules.
Four states -- Delaware, Indiana, Louisiana and North Dakota - were denied their waivers by HHS. In those states, HHS "determined there is not sufficient evidence that the MLR requirement will destabilize the individual market," according to Avalere.
The waivers, which last until 2013, are designed to "give plans more time to come into compliance," Kowalsky said.
Another seven states -- Florida, Kansas, Michigan, North Carolina, Oklahoma, Texas and Wisconsin -- have since applied for waivers, but no decision has been made, according to the Center for Consumer Information and Insurance Oversight's website.
Under the ACA's rules for MLR, plans that report a MLR below the established standards must rebate the difference back to their customers. In theory, the rules are intended to "ensure that customers have their money spent on claims," Kowalsky said, as opposed to administrative expenses.
