One of the pack of states that has challenged the health reform law in court, Indiana is now the latest state to have a final application pending with federal regulators to escape the law’s most basic consumer protection: the requirement that health insurers spend at least 80% of premiums on actual medical care, instead of administrative waste and excessive profits.
Several states have submitted applications for a waiver of the rule, called the medical loss ratio or MLR. None have suggested, as Indiana does, that federal regulators waive the rule completely, in perpetuity, for a whole class of health plans.
Indiana Insurance Commissioner Stephen Robertson’s letter asks federal regulators to exempt so-called consumer driven health plans — better known as high-deductible health plans or HDHPs. These health plans have been growing in recent years as premiums increase and consumers are pushed into less and less comprehensive plans. They have been great profit-generators for the insurance industry – as McClatchy reports:
profits continue to pour in for insurers, who are spending less for services as covered workers postpone doctor visits and other elective medical procedures during the economic downturn. That trend was reflected in a quarterly measurement of employer health care costs by the Bureau of Labor Statistics, which came in at its lowest level in more than 10 years for the first half of 2011.
Ignoring the evidence that HDHPs are a cash cow for the insurance industry, members of Congress have jumped on this industry messaging as well, arguing that HDHPs and the MLR standard can’t coexist. It's another front in opponents’ attack on the health reform law.
HDHPs require consumers to bear more of the cost burden of health care and promise lower premiums in return. Indiana argues that plans with higher cost-sharing and a lower actuarial value are incapable of spending enough money on medical claims to meet the 80% MLR standard. However, the MLR standard requires a ratio of total premium paid go toward medical expenses, not an absolute dollar amount of medical spending per policyholder. That ratio is achievable for HDHPs if less medical spending goes hand in hand with lower premiums. The insurance industry would like us to believe that HDHPs cannot meet the efficiency standards required of the rest of the health insurance market. In truth, what they cannot do is meet those standards while maintaining the excessive profits they currently generate for insurers. A waiver of the rule for HDHPs would have a predictable: pushing more consumers into these low-benefit, high-cost plans as insurers shift their business to the one product with no check on profits.
A final decision on the application is due from HHS by the end of the month. Needless to say, Consumer Watchdog has urged the Secretary to reject Indiana’s application. (Download our letter to Secretary Sebelius here.)
The regulations implementing the MLR rule allow states to get a limited waiver of the rule only if there is proof that the state’s individual insurance market will be destabilized if it takes effect. Indiana fails to make the case.
Take the headline of the press release Indiana put out with its application. “After Nearly 10% of Individual Insurance Carriers Withdraw from Indiana Market, Insurance Commissioner Seeks Waiver From Key Part of Federal Health Care Law” – suggesting that health insurers are fleeing the state because of the medical spending rule. In fact, none of the insurers that Indiana cites would have had to change anything to meet the MLR standard. Of the six carriers that Indiana says have left the state since the Affordable Care Act was enacted, two were well above the MLR standard in 2011. The other four were so small they would not have had to comply.
Indiana wants an MLR waiver because state politicians oppose health reform, not because it's going to do any harm to the health care market. HHS has to make clear that one gets a waiver to health reform's key consumer protection just because they don’t like the law.