Maine exempted from health reform's medical-loss ratio rules

At least one major insurer threatened to pull out of the state if required to spend 80% of premiums on patient care.

By David Glendinning — Posted March 17, 2011

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Maine has become the first state to receive a federal exemption from a health system reform provision requiring insurers to spend a minimum amount of premium dollars on actual medical care.

The medical-loss ratio requirement in the reform law mandates that at least 80 cents out of every premium dollar go toward patient care and quality improvement, rather than administrative costs and plan profits. Under the three-year exemption that will last through 2013, Maine insurers will be required to spend only 65% of premiums on care, the current threshold maintained by the Maine Bureau of Insurance. The waiver may terminate at the end of 2012 if the federal government deems that it no longer is needed.

The Dept. of Health and Human Services, which granted the exemption, said the Maine insurance market was in danger of becoming destabilized if the 80% medical-loss ratio mandate were maintained. Only three major insurers serve the Maine market, and at least one of the companies indicated that it might pull out of the state if the exemption were not granted.

HHS indicated that it granted the waiver given the unique insurance situation in Maine. However, Florida, Kentucky, Nevada and New Hampshire also are seeking medical-loss ratio exemptions for the insurance companies servicing their states.

In recent weeks, the Obama administration has granted a number of high-profile exemptions from health reform provisions to insurers and states. The White House has said the moves show the administration is flexible when it comes to the reform law's mandates, but opponents of the statute said the developments were signs that the law's requirements are unsustainable in the face of plans to expand health coverage nationwide.

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