Feds deny request to delay new insurance rules to 2014

July 22, 2011 | | Comments 0

By Beth Musgrave

FRANKFORT — Federal officials have denied Kentucky’s request to delay implementation of a portion of the federal health care overhaul bill until 2014.

But officials with the Department of Health and Human Services did allow Kentucky to delay full implementation of the provision that would require insurance companies to spend 80 percent of premiums on paying customers’ claims until 2012, according to letter the federal agency sent the state on Friday.

Kentucky plus 11 other states and Guam had asked federal authorities to delay implementing the requirement in the Patient Protection and Affordable Care Act. The medical loss ratio was born out of concerns that insurance companies were spending too much on executive salaries, marketing and other overhead costs while at the same time raising premiums for customers. If an insurance company does not meet the 80 percent ratio it will be required to forfeit or repay its customers.

Kentucky had asked federal authorities to gradually increase the medical loss ratio to 65 percent in 2011, 70 percent in 2012, 75 percent in 2013 and 80 percent in 2014. The Department of Insurance said that Kentucky’s insurance market was small and there were concerns that requiring an 80 percent medical loss ratio would result in more insurance companies leaving the state. In 1994, the state overhauled its health insurance laws, resulting in 43 companies leaving the Kentucky market.

But in a letter to state officials, federal officials said that they believed that companies operating in Kentucky would be able to meet the 80 percent ratio by next year without substantial losses and disruptions to Kentucky markets. Kentucky insurers will be required to meet the 75 percent medical loss ratio this year and 80 percent the following year.

Ronda Sloan, a spokeswoman for the state Department of Insurance, said Friday that the department has not yet determined if it will ask federal authorities to reconsider the decision. Sharon Clark, the commissioner of the Department of Insurance, said in a written statement that she was relieved that federal officials granted Kentucky insurance companies a one-year grace period.

“We are pleased that HHS recognized that an immediate implementation of an 80 percent standard could destabilize the individual market. We believe allowing a 75 percent requirement for 2011 will assist Kentucky going forward,” Clark said.

According to the Department of Health and Human Services estimate, Kentucky insurance consumers could receive up to $1.3 million in payments from insurance companies that could not meet the 75 percent medical loss ratio.

Filed Under: EducationFederal GovernmentGeoff DavisSteve Beshear

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