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Oklahoma Dismayed by federal MLR Decision

Ernie Shannon's picture

While the state of Texas awaits the federal government’s decision regarding delaying health insurance rebate payments, Oklahoma is deciding a course of action after having a related request rejected by the Department of Health and Human Services.

On January 4, the federal agency turned down Oklahoma Insurance Commissioner John Doak’s inquiry into postponing the date when health insurance companies would have to abide by the medical loss ratio provision (MLR) of the Affordable Health Care Insurance Act. The MLR provision requires health insurance companies to devote at least 80 percent of their premiums to health care-related expenditures and only 20 percent to overhead costs and profit. Doak argued that the 80/20 MLR would seriously disrupt the insurance market in Oklahoma and he’s standing by that prediction a week after the fed’s decision.

“This decision could lead to a massive disruption of our insurance markets in Oklahoma,” Doak said. “MLR is an arbitrary and superficial means of judging the worth of an insurance company to its policyholders. Just because one company is able to attribute a smaller percentage of its operating costs to each policyholder does not necessarily mean its policyholders received a greater value for their dollar.”

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Doak extended his comments on the Health and Human Service’s decision in a statement this week in which he said MLR isn’t a reliable means of determining a health insurance company’s effectiveness to consumers. Some Oklahoma companies that will struggle to meet the MLR requirements are nonetheless price-competitive with other companies that do or will meet the MLR threshold. Small carriers also frequently serve rural markets in which larger carriers have less or no interest in doing business, providing conscientious, personalized customer service to Oklahoma policyholders.

American Health Insurance Plan’s Robert Zirkelbach made similar comments after Texas filed its request for a delay: “The biggest issue is it doesn’t address the soaring cost of medical care. And instead it imposes a new, arbitrary cap on health plan administrative costs.”

If Oklahoma and Texas along with 14 other states believe the 80 percent figure is “arbitrary,” it is in fact higher for large group insurers. When Health and Human Services issued a final rule on MLR in December, large group insurers were put on notice to meet an 85/15 ratio of health care to overhead spending.

Not all states seeking a waiver of the 80/20 MLR have been denied. Maine, Georgia, New Hampshire, Iowa, Kentucky, and Nevada have actually had their requests granted. Indiana and Louisiana join Oklahoma in having their requests denied.