Actuary: Act Fast, Or Individual Health Insurers Will Flee

If regulators do not come up with a realistic medical loss ratio rule transition plan for individual heath insurance, insurers may start to abandon the market in June.

Rowen Bell, chair of the medical loss ratio regulation work group at the American Academy of Actuaries, Washington, issued that warning in a letter about the medical loss ratio rule sent to officials at the National Association of Insurance Commissioners, Kansas City, Mo.

The Patient Protection and Affordable Care Act actuarial subgroup, part of the Accident and Health Working Group at the NAIC, has posted the letter in a collection of comments on the minimum medical loss ratio provision in the new federal Affordable Care Act.

ACA is the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act.

The ACA will require providers of individual health insurance to spend at least 80% of premium revenue on paying insureds’ medical claims.

Bell, who is now an actuary at an independent accounting firm and who once worked for the Blue Cross and Blue Shield Association, Chicago, has written to recommend that regulators work quickly to come up with transition rules.

“Some carriers may seek to exit the individual market out of concern about the impact that rebate requirements in 2011 may have on their existing book of business and potentially on their solvency,” Bell writes to regulators on behalf of the AAA medical loss ratio regulation work group.

To get out of the individual market by Jan. 1, 2011, an insurer may have to announce its intent to withdraw by June, to give insureds a 6-month warning, Bell writes.

“Consequently, any transitional alternatives will be more effective, in terms of minimizing potential individual market disruption, if they are announced in the next several weeks,” Bell writes.