Will MLR Rules Lead to Market Consolidation in Maine?

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July 13, 2010

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In a July 1^st letter to Health and Human Services Secretary Kathleen Sebelius, Maine’s Insurance Superintendent asked for a federal waiver that would allow health insurers in Maine to comply only with the state’s 65% medical loss ratio (MLR) in the individual market, as opposed to the federal guideline of 80%. Rebates to consumers from insurers not meeting the 80% MLR are due to begin in 2011. Superintendent Kofman argues that although she supports health reform and implementation of the federal law (ACA), she is convinced that adherence to the federal MLR guideline will drive one of only two insurers that are accepting new patients from the state’s individual market. She argues this will have a negative effect on Maine’s families. As reported in a Robert Wood Johnson Issue Brief dated July 2010, policy makers will need to exercise discretion when dealing with destabilization in the individual market. Signs of market destabilization include voluntarily surrendering licenses and closing businesses prior to 2014.

While MLR’s are meant to ensure a certain percentage of premium dollars are spent on medical services, the practical effect may be blunted as states and the federal government have differing definitions of what constitutes a medical expense. Kofman notes that other safeguards in place already protect consumers from excessive premiums:

Maine has had a medical loss ratio requirement of 65% in the individual market since 1993. Premium rates are subject to prior approval by the Superintendent and the burden is on the insurer to demonstrate that it will meet the MLR requirement. Maine’s MLR, unlike the federal standard, does not allow taxes or other expenses to be deducted nor does it consider quality improvement expenses or any other expenses to be medical. “Medical” expenses are medical claims paid. Functionally, Maine’s 65% MLR is somewhat but not substantially lower than the federal standard.

For Superintendent Kofman’s letter, click here.

For more on MLR, click here

For Robert Wood Johnson’s Issue Brief, click here.

Will MLR Rules Lead to Market Consolidation in Maine?

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