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Commissioner McCarty Joins in NAIC Letter on PPACA

Commissioner McCarty Joins in NAIC Letter on PPACA

Florida Insurance Commissioner Kevin McCarty and other state insurance commissioners recently wrote to U.S. Department of Health and Human Services Secretary Kathleen Sebelius regarding concerns with the medical loss ratio requirements arising from the Patient Protection and Affordable Care Act (PPACA).  Under the PPACA, the National Association of Insurance Commissioners (NAIC) must develop uniform definitions and standard methodologies for calculating the medical loss ratio.  However, state regulators have identified several issues of concern and seek to ensure that federal rulemaking does not adversely affect health insurance markets.

State regulators point out that the medical loss ratio requirements have the potential to limit consumer choices and destabilize markets.  If improperly applied, the requirements could impair the ability of insurers to maintain sufficient capital and satisfy risk-based capital requirements.  The state commissioners therefore urge that federal rules should be developed in a way that does not hinder the ability of states to preserve the financial stability of their health insurance markets.

As the states seek some relief from the 2011 medical loss ratio requirements, state regulators intend to provide recommendation on transitional exemptions.  The following factors are among those to be considered in developing the recommendations: (i) the potential impact on insurer solvency; (ii) the potential loss of carriers in markets and the impact on consumers of reduced competition; (iii) the ability of consumers to find affordable products if their carriers leave markets; (iv) the potential impact on benefits and cost-sharing of existing products; (v) the potential impact on premiums paid by current policyholders; and (vi) the potential impact on consumer access to agents and brokers.  The state commissioners also encourage the Department of Health and Human Services to consider the essential role of producers as it develops its medical loss ratio regulations.

The commissioners note that insurers selling expatriate and international health insurance policies have requested exemptions from the medical loss ratio requirements.  The letter describes the unique nature of expatriate and international health insurance policies and recommends either exempting them from requirements and making adjustments to the manner in which the requirements apply to them.

Finally, the state commissioners offer three recommendations relating to the rebate program.  First, the commissioners believe any rebates should be paid to the individuals or entities that paid the premiums.  This means rebates would be made to employers for distribution to enrollees in the event of employer-paid premiums and directly to individuals in the event of individual-paid premiums.  Second, the state commissioners suggest that policyholders eligible for rebates should receive them in the form of premium credits or checks.  Third, carriers should be required to make good faith efforts to locate persons entitled to rebates, and if unable to locate those persons the rebates should be governed by state unclaimed property statutes.