So what did Texas ask for, exactly, regarding the MLR?
We are not opposed to the MLR in its entirety. What we would like to do is a phased approach. Some states have filed a waiver to not hold their carriers to the MLR, but Texas has said “we will get there eventually, but we want to phase it in over time.”
What Texas is really afraid of is that some healthcare markets are more profitable than others, and that while some are profitable, others are running at a loss. The fear is that if you implement the MLR suddenly, some markets will feel they will be forced to raise their premiums, which could result in losing business. Or, it could force carriers to leave those markets altogether.
How did Texas want to phase in the MLR?
According to a letter from the Commissioner in 2011, Texas requested a 71% MLR in 2011, a 74% MLR in 2012, a 77% MLR in 2013 and an 80% MLR in 2014. The HHS simply said no. They denied it altogether. It is what it is.
Have any other states succeeded with similar requests for a more flexible phase-in of the MLR requirement?
No. There has been no flexibility with other states. Nor has there been any reason given for the lack of flexibility. To my knowledge, there is no flexibility in the law, the way it is drawn up.
When you look at the MLR, a lot of people think there is a lot of money to be saved when you require the health plans to meet certain MLR requirements. The truth is, the savings are not really there.
What is interesting is to find out how much the MLR impacts the individual; does it really make health care more affordable?
On healthcare.gov, on February 16, the federal government noted that thanks to the MLR, up to nine million people could be up for a total of $1.4 billion in rebates. Everybody’s going to hold their hand out. But when you put pen to paper, the savings represent $164 to the individual per year. That’s $13.66 a month. Now, when you take a $400 premium and lower it $13.66 to make it more affordable, nobody on the face of the Earth is going to say, gee, I can afford it now.
The bottom line is that the intent of the MLR is good. But it’s just not there. When PPACA first came together, I did presentations on it, and on national average, you had Cigna playing 89.5% on claims, Aetna paying 85.4% on claims and Humana paying 84.7% on claims.
Look at Wellpoint in 2009. It was the biggest health insurer in America with $4.75 billion in net income. People see that and they get mad. They make billionsI Why charge so much? Wellpoint said they they could refund it all to their members and make zero money, but it would be $11.75 a month. So $4.75 billion sounds like money hand over fist, but that’s not really the case. It’s $11.75 a month.
Will $11.75 or $13.66 a month make health insurance more affordable? No. That’s the misunderstanding of the MLR. The majority of health plans are already there, and if they are not, then they are not missing it by much.