Keeping up with the delays and extensions in Obamacare has become a new pastime for reporters. Now, they may have one more delay to add to their list. According to Kaiser Health News (and first reported by subscription-required InsideHealthPolicy), the Obama administration this week said it is considering a rule change that would relax the enforcement of the medical loss ratio (MLR) provision for health insurers.
The MLR provision, which took effect in 2012, requires insurers in the individual and small-group markets to spend 80 percent of every insurance premium dollar (85 percent for insurers in the large-group market) on medical care and expenses for customers. The remaining percentage can be used for administrative costs and profits. If an insurer does not meet its ratio, it must issue a rebate to its customers.
In the Federal Register, the Department of Health and Human Services signaled it may give insurers a temporary break on the ratio requirements, citing “the special circumstances” of the disastrous launch of Obamacare’s federal exchange website (HealthCare.gov). The administration also made other last-minute political changes during open enrollment, which ends on March 31.
Under Obamacare, any extra expenses caused by the Obama administration would be considered administrative costs, which would mean that insurers could be on the hook for sending out rebate checks they hadn’t factored into their operating costs.
The report did not specify which expenses incurred by insurers will qualify for the new exemption or how much the ratio will be increased. America’s Health Insurance Plans, a Washington, D.C.-based trade group for the health insurance industry, told Kaiser Health News the potential exemption was warranted.
“Health plans made considerable investments in time, resources, and manpower to minimize disruption to consumers caused by all the technical problems of HealthCare.gov,” AHIP spokesman Robert Zirkelbach said to Kaiser Health News. “Health plans should not be penalized for all the extra work they have done to help consumers through this process.”
The Heritage Foundation’s senior research fellow Edmund Haislmaier has warned Congress for years that MLR requirements would create new barriers for start-up insurers entering the market, discourage competition, and invite fraud.
“These undesirable and unintended consequences of [Obamacare’s MLR] regulations offer an object lesson in how greater information transparency is often a better public policy solution than new regulations,” he testified in a House subcommittee hearing on the rules in 2011.