The Obama administration denied Wisconsin’s request for a waiver from the health law’s medical loss ratio, but partially approved North Carolina’s. These two decisions conclude the review the Department of Health and Human Service (HHS) has conducted of the 17 states that have requested a waiver from the law’s requirement that individual market health plans spend at least 80 percent of premiums on medical care or give customers rebates. In total, HHS has rejected 10 requests (North Dakota, Delaware, Texas, Kansas, Oklahoma, Florida, Indiana, Louisiana, Michigan and Wisconsin) and approved modified applications from seven states (Maine, New Hampshire, Kentucky, Nevada, Iowa, Georgia and North Carolina).

Wisconsin wanted a lower ratio of 71 percent in 2011, 74 percent in 2012 and 77 percent in 2013. HHS determined that most of its carriers were already at the 80 percent threshold or on the way there, and thus the application of an 80 percent MLR standard would destabilize Wisconsin’s individual market. North Carolina had requested an adjustment of 72 percent, 74 percent, and 76 percent for reporting years 2011, 2012, and 2013, respectively. HHS found that the state’s insurance market was highly concentrated – Blue Cross Blue Shield has an 81 percent market share – and that imposing a full 80 percent MLR on smaller carriers could make it impossible for them to compete.

In a fact sheet, HHS determined to grant an alternative adjustment of 75 percent for 2011 only, with the 80 percent standard to apply in 2012 and 2013 in order to ensure market choice is preserved. This approach creates a glide path for compliance with the 80 percent standard.