Louisiana Insurance Commissioner Jim Donelon recently forwarded a letter to the United States Department of Health and Human Services (HHS) requesting reconsideration of their denial of the Medical Loss Ratio (MLR) wavier which the state requested earlier this year.  Medical Loss Ratio is a requirement of the Patient Protection and Affordable Care Act (PPACA) which requires that health insurance companies spend 80 to 85% of premiums on actual medical services and the balance on other costs.  The waiver which sought to phase in the 80% target for individual policies (the only ones eligible for such a waiver under PPACA) over three years was denied on November 27, 2011. 

Donelon cites the lack of competition in Louisiana’s health market due to the fact that there is one dominant company in the state as the primary reason for reconsideration of the denial.  “While that company services its insureds in an exemplary fashion, and employs over 1900 Louisiana citizens statewide, preserving competition is essential in order to afford consumers protection through competition.  I truly believe that the best way to control health insurance costs is through competition in the private sector,” says Donelon.

An integral part of competition in the private sector is provided by life and health insurance agents who have the ability to do comparison shopping for their policy holders at a cost of under 5% of the premium.   If a waiver is not granted to companies competing with the dominant carrier, Donelon fears those companies will be forced to squeeze the agents out of the process and as a result lead to a single-payer system, which he believes is not in America’s best interest. 

On November 22, the National Association of Insurance Commissioners (NAIC) adopted a resolution urging Congress and HHS to use their respective authorities to preserve consumer access to insurance agents and brokers by adjusting the MLR component of PPACA to accommodate the essential service provided by producers in the health insurance market.

Here in Louisiana four of the top nine health insurance providers with over 1000 individual policies in force would be better able to continue to pay up to 5% agent commission for the 3 year period of phase in of the PPACA required 80% MLR.  The waiver reconsideration letter asks HSS to weigh the effects of MLR on these smaller companies, the individual life and health agents, and on competition in the Louisiana health insurance market as a whole.