“The waiver approach that the department has come up with is a way to solve this problem,” says Karen Ignagni, president of America’s Health Insurance Plans, which lobbies for the insurance industry.
In administering the new spending requirement, the Obama administration walks a tightrope: It seeks to drive down the cost of insurance but not to the point where it drives health plans out of business.
“We want consumers to get the benefit of the medical loss ratio and the value of their premium dollars,” says Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, the office charged with implementing the health-reform law. “We also want to do it in a way that isn’t disruptive to states’ insurance markets.”
The administration has denied only one state’s application, from North Dakota, while nine others await decisions in coming months. Last week, Health and Human Services signed off on a waiver for Georgia, the largest state so far issued a regulatory reprieve.
Of all the pending applications, none has drawn as much heat as Florida.The state has staked out an aggressive political position against the health-reform law. 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 decision has big financial implications: If it is approved, numerous reports estimate that Florida insurers would avoid about $60 million in consumer rebates. “We doubt the waiver will be approved,” Citibank analyst Carl McDonald says of Florida’s request. “But if we’re wrong, it will drive earnings upside at several plans.”
Florida Insurance Commissioner Kevin McCarty argues that customers will suffer without the waiver. In public hearings, health plans testified that they would stop offering certain products. Others predicted that new carriers would be discouraged from entering the market.
“One of our largest carriers told us they would not be offering some of the products they do now,” McCarty says. “Having fewer options is disruptive to our consumers.”
Consumer advocates, however, contend the waiver is unnecessary: With 21 companies selling on the individual market, consumers have many options.
Groups have protested outside one insurance company’s office over the issue, inspired supportive newspaper editorials and submitted thousands of signatures to the Obama administration to petition against Florida’s waiver request.
“The law is very clear in its intent: This policy is meant to save policyholders money,” says Laura Goodhue, executive director of the Florida Community Health Action Information Network. “If the federal government approves this application, it sets a bad precedent for other states.”
For nine months, McCarty has gone back and forth with the federal government, responding to three requests for additional information. With the waiver application finally deemed complete in late October, a decision is due Thursday. All eyes are on Florida.
“We watch it as a test,” Keckley says. “It’s a test of the degree of flexibility that Health and Human Services is willing to give on this.”