HHS Rejects Wisconsin's Request for a Transitional MLR Adjustment
Madison, WI—Today, U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius formally rejected Wisconsin's request for an adjustment in the state's medical loss ratio standards. The 2010 Patient Protection and Affordable Care Act (PPACA) requires insurers to spend eighty to eighty-five percent of premiums on direct patient care beginning in 2011. Last year, Wisconsin applied for a waiver allowing the state to grant insurers a transition time frame to implement the new changes.
"The Obama administration's decision is puzzling. Four insurers have already exited Wisconsin, and consumers are being forced to transition to new coverage or a new insurer. We thought that a three-year transitional medical loss ratio—allowing insurers some time to adjust to changing market conditions—was prudent, and we could avoid any additional market exits. This rejection puts Wisconsin consumers at risk. We also expected the federal government to defer to our expertise on the Wisconsin marketplace, after all the states have been the primary regulator of insurance issues since at least the 1940's," Wisconsin Insurance Commissioner Nickel stated.
As required by PPACA, Wisconsin's application for a waiver demonstrated that we had concerns regarding the availability of agents to serve Wisconsin consumers, and that PPACA's loss ratio standard could result in insurers leaving the state. In responding to HHS's request for additional information, the state also highlighted concerns that some Wisconsin consumers live in counties that have both potentially concentrated health insurance markets and were "underserved" from a medical standpoint. A loss of a health insurer in these counties could lead not only to market disruption, but could impact the availability of medical care. A three-year transition would have allowed the Office of Commissioner of Insurance to better protect Wisconsin consumers in these and other counties.
However, the Department of Health and Human Services decided to ignore the threats to the Wisconsin market by ignoring the impact of insurer exits. In their rejection letter, HHS stated that "we do not believe that the exits by these four insurers supports the OCI's concern that immediate implementation of the 80 percent MLR standard could lead to market destabilization."
"We had hoped this decision would be made outside of politics, but it is clear that the Obama administration has at least one eye on the re-election campaign. Unfortunately, we are living in a new world with PPACA turning our long-standing understanding of federalism on its ear." said Nickel. "This kind of federal control of the Wisconsin health insurance market is exactly why the state joined the multi-state lawsuit against PPACA and why this law is doomed to fail."
Created by the Legislature in 1871, Wisconsin's Office of the Commissioner of Insurance (OCI) was vested with broad powers to ensure that the insurance industry responsibly and adequately met the insurance needs of Wisconsin citizens. Today, OCI's mission is to lead the way in informing and protecting the public and responding to its insurance needs.