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White House to Florida: No health reform waiver

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While it won’t get as much attention as the Wyden-Ryan Medicare proposal, another health policy development this afternoon that stands to have wide-ranging implications: The Obama administration has denied Florida’s request to waive a key health reform regulation.

The regulation at hand is the new medical loss ratio, which requires insurance companies to spend at least 80 percent of subscriber premiums on medical costs. The other 20 percent can go to administration and profits. Insurance companies that don’t hit the target have to send their subscribers rebates for whatever they should have spent on health costs.

But health insurers also see another option. Over the past year, the Obama administration has begun issuing waivers from the medical loss ratio requirement to lower the required medical spending. The waivers go to an entire state, rather than an individual insurance company. They’re issued in states where the Obama administration determines the new spending requirement would be too disruptive to the health insurance industry, potentially driving some plans out of business.

The Obama administration has approved some, rejected others and still has many pending. Here’s what that looks like in a map drawn up by consulting firm Avalere Health:

Of all the pending applications, none has drawn as much attention as Florida. It is the largest state to apply for a waiver and has the most competitive insurance market, with 21 companies selling on the individual market. The state has staked out an aggressive political position against the health-reform law.

The decision has big financial implications: If it is approved, numerous reports estimate that Florida insurers would avoid about $60 million in consumer rebates. Citi analyst Carl McDonald has described it as “the battleground state” on the issue.

On Thursday, the Obama administration denied the waiver application; it found the state’s argument for a waiver unpersuasive. The regulation would not, the administration writes in a 16-page document, “destabilize the Florida individual market.”

Consumer advocates will cheer the decision and see it as a strong defense of the health-reform law. Insurance companies won’t like it but likely aren’t totally blindsided: Many had been skeptical that Florida would get a waiver in the first place.

What will be interesting to watch now is how this effects the politics of health reform in Florida, a state where the law is unpopular and Gov. Rick Scott refuses to implement its provisions. “Until the election is over, the administration has really got to be cautious about confronting governors who don’t want to cooperate,” Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public Health, told me when we spoke about the waiver last month. “In Florida, you’re looking at a swing state where many seniors are concerned, and the governor is strongly opposed.” If the state sees any disruptions in its insurance market, it now has a regulation that can make for an easy political culprit.

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