Florida is asking the federal government to delay a requirement that health insurers use at least 80 cents of every dollar in premium money to pay for medical treatment, a move that could deny customers more than $170 million in rebates.
If federal officials give the state a waiver granting a three-year delay, insurance companies will get to keep the money they otherwise would have to pay in rebates and could spend it on marketing, salaries, commissions to brokers and other administrative costs.
The Health and Human Services Department could rule on the waiver request as early as November.
Consumer groups oppose the request, which applies only to policies covering people who buy insurance on their own.
There are conflicting estimates on how many Floridians are covered through the individual market and therefore could be eligible for rebates.
In its waiver application, the state said about 842,252 people are covered through the individual market. But the number could be more than 2 million, based on census data.
The insurance industry said some insurers will leave Florida if the waiver isn't granted. Independent insurance agents already are reporting layoffs as insurers cut commissions to meet the new requirement.
Florida is one of 17 states seeking a waiver to the insurance spending requirement, part of the sweeping health care reform bill President Barack Obama signed into law in March last year.
Insurers that don't spend at least 80 percent of the premiums they collect on medical care, starting this year, must pay policyholders the difference as rebates. Those rebates would go out next year, based on 2011 spending.
The federal law trumps Florida law, which allows insurers to spend as little as 65 percent on medical treatment.
To avoid paying rebates, insurers across the country are reducing commissions paid to brokers and lowering premiums, according to the Government Accountability Office, the investigative arm of Congress.
Florida Insurance Commissioner Kevin McCarty is asking for the three-year delay to give insurers and brokers time to adjust to what he called "monumental shifts in standard industry practices."
Consumer groups, including Florida PIRG, say the state has had time to adjust and that its robust insurance market will continue to provide ample customer choice without the need for a waiver.
They note that the state's largest insurer, Blue Cross & Blue Shield of Florida, which serves 40 percent of the individual market, already meets the 80 percent requirement.
Consumer Watchdog also notes that Republican Gov. Rick Scott opposes the health care law and has declined to accept or apply for millions in federal grant money associated with the law. One in 5 Floridians is uninsured.
If the waiver isn't granted, 12 of the 20 insurance companies operating in Florida would have to rebate customers a total $76.1 million next year, $50.6 million in 2013 and $47.2 million in 2014, according to state records.
The 12 are: American Republic Insurance, AvMed, Connecticut General Life Insurance, Coventry Health Plan of Florida, Freedom Life Insurance, Golden Rule Insurance, Humana Health Insurance, John Alden Life Insurance, Mega Life & Health Insurance, Mid-West National Life Insurance, Preferred Medical Plan, and Time Insurance.
At a glance
What's the new law?
The 2010 health care overhaul requires that insurance plans sold to individuals and small groups spend 80 percent of the premiums collected on medical services, instead of on profits, marketing, salaries and other administrative costs.
Plans sold to large groups have to spend 85 percent on medical care. Starting this year, insurers that spend less have to issue rebates to policyholders. The rebates for this year would be issued next year.
What's the proposed change?
States can ask the federal government to waive the new rule for the individual insurance market if they can show that the 80 percent minimum would cause too many insurers to stop writing policies.
Florida has asked for a three-year delay before the requirement kicks in.
How does that compare with state law?
Florida allows insurers to spend as little as 65 percent of premium money on medical treatment, depending on the plan.
Which Floridians would be affected by the state's waiver request?
State residents who buy insurance on their own, instead of getting it through an employer or a public plan like Medicare or Medicaid.
How much would insurers owe Floridians in rebates?
Insurers have told the state they would have to pay more than $170 million over the next three years.
