Maine Receives Waiver from Medical Loss Ratio Requirements Under Health Care Reform

The federal Department of Health and Human Services has granted Maine’s request for a waiver from health care reform’s medical loss ratio rule. This new rule requires health insurance companies to devote at least 80 cents (85 cents in the large group market) of every premium dollar to providing health care services for their customers — thus spending no more than 20 cents (or 15 cents) on profits and administrative costs. Health insurance companies not meeting the 80 (or 85) percent requirement would be required to provide rebates to policyholders under certain circumstances. The rule is designed to bring down the cost of health care coverage.

The waiver affects only Maine’s individual insurance market, not the group health insurance market, and allows health insurance companies to hold the amount spent on customer health care services at the current rate of 65 percent until the end of 2013. As the health care reform law envisions, by 2014 state health insurance exchanges will provide individuals with new, affordable health insurance options.

Maine is the first state to receive a waiver from the medical loss ratio requirements. The State Bureau of Insurance filed its request for a waiver because of concerns that one of the three major insurers offering individual health insurance would withdraw from the Maine market if the federal medical loss ratio rule remained in place. Such a withdrawal “has a reasonable likelihood of destabilizing the Maine individual health insurance market,” as the HHS letter granting the waiver stated.