Working Together For Michigan Consumers To be Healthy

Gongwer News: Fed Deny State Request on Health Insurance

Gongwer Volume #50, Report #246 — Monday, December 19, 2011

Feds Deny State Request On Health Insurance

Michigan residents may see rebates of at least $53 million from health insurance companies because of a decision by the federal government, but state officials worry the decision may actually drive costs higher and force some health insurance companies to leave the state.

The Centers for Medicare and Medicaid Services in the U.S. Department of Health and Human Services rejected a request from the Michigan Office of Financial and Insurance Regulation to phase in a requirement that health insurance companies writing coverage for individuals spend at least 80 percent of their premium income on medical care.

The requirement takes effect on January 1. Those companies that fail to meet the requirement are required to either cut premiums or pay back consumers for the differential between what the company spends and the 80 percent requirement. The 80 percent requirement was included in the 2010 Patient Protection and Affordable Care Act (called Obamacare by critics).

The state was one of 13 states to make such a request or a similar request, asking the government back in July for the ability to phase the requirement in over three years. The federal government approved requests in six states, but denied them in the rest, including Michigan.

But in a 17-page response, dated Friday, the federal office rejected the request.

OFIR Commissioner Kevin Clinton said in his request, backed by Governor Rick Snyder, that because state law requires that companies have a so-called medical loss ratio of 65 percent instead of the new federal requirement of 80 percent, he was concerned that the state would see some companies leave the state rather than continue to write coverage.

The market for individual coverage is dominated by Blue Cross/Blue Shield of Michigan, which writes nearly 80 percent of the market. The company also has a loss ratio of some 93 percent.

As the federal government was considering the request, OFIR said two companies had announced they would leave the state, but the federal government said those companies were going to stop writing individual policies nationwide.

The federal CMS office also rejected arguments that the market would see a loss of other carriers, saying in effect the evidence presented by the state did not support the argument.

In a statement, Mr. Clinton said the state had not yet decided if it would appeal the decision.

He also said he was disappointed with the ruling, and, “We’re hopeful it doesn’t result in increased costs and fewer consumer choices in the state’s health insurance market.”

Meanwhile, Don Hazaert, director of Michigan Consumers for Healthcare, said, “Today’s decision is a significant defeat for the insurance lobby and one that will allow our state’s consumers to rightfully keep more than $53 million of their own hard-earned money.”

The organization had opposed the state’s request.

But U.S. Rep Mike Rogers (R-Brighton) blasted the Obama administration’s decision.

“Today’s decision will cause job losses throughout the state, and force families in Michigan to lose the current health coverage of their choice,” he said in a statement. “More than 340,000 people in Michigan receive their health coverage in the individual market. Many health plans in the state will not be able to meet the burdensome MLR standard, forcing some to scale back coverage or leave the state altogether. It is without a doubt the immediate result of a misguided federal mandate that assumes faceless Washington bureaucrats know best.”

Category: Correspondence