Will HHS exceptions become the rule?

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HHS’s head of insurance oversight Steve Larsen got heat from a hostile House committee this afternoon, where he was asked why, if the federal health reform law is so great, is HHS granting waivers to its rules?

It’s funny, because health reform haters would also be screaming from the rooftops if HHS had denied any waivers, and instead let disappear the bare bones insurance policies known as mini-meds that often pay out just a few thousand dollars in case of an illness.

Many of these limited-benefit plans are so bad that Americans would be better off without them. HHS has decided to let most of them live for an extra year.

A second health reform waiver battle is being fought around new medical loss ratio rules that require insurance companies selling individual coverage to spend 80 cents of every premium dollar on health care. States, at the behest of the insurance industry, are seeking to evade the rule which is supposed to make health insurance companies more efficient. Waivers mean insurers will have no incentive to rein in medical spending that has gone up 138% over the last dozen years, wildly outpacing the 31% rate of inflation over the same time period.

Waiving the rule for three years would eliminate a key tool in the federal reform law to rein in waste and ensure consumers get quality benefits for the premiums they pay. (Although, without rate regulation, insurers may twist that incentive and actually increase premiums in order to increase profits – more on that here.)

HHS granted Maine an exemption last week. Implementing the rule there was likely to have caused one of the two companies selling individuals health insurance to leave the state entirely, rather than give up a dime of profit. Now, Mega customers will have to sit with their fingers crossed that they don’t have any medical needs that the insurer, notorious for its junk policies that don’t pay the bills when consumers get sick, won’t cover for the next three years until the exemption expires.

Under the federal reform law, the only grounds on which the Secretary may grant a waiver is if the medical loss ratio rule will destabilize the individual insurance market. Maine was between a rock and a hard place –  the likelihood of no coverage vs three more years of junk coverage for 14,000 Mainers. New Hampshire isn’t in the same boat. 

New Hampshire has four companies selling individual insurance. (The details of New Hampshire's waiver application here.) One of these, Anthem, dominates with 72% of the market. By New Hampshire’s calculation, Anthem had a 70% MLR in 2009. Of the state’s other three individual insurers, two of them easily meet the medical loss ratio requirements. Anthem has little incentive to leave a profitable market that it nearly monopolizes, meaning a requirement that Anthem spend more on patient care, or lower premiums, will put the company on a more even playing field with its competitors and give consumers more choice. The fourth company, junk insurer Chesapeake Life, (a sister company to Mega), reports a loss ratio so low – 39% – that it isn’t worth saving. 

Too many exceptions eventually become the rule. Let's avoid renaming HHS the Adjustment Bureau.

Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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