State seeking federal waiver on insurance rules

State Insurance Commissioner Ralph Hudgens is requesting an exemption from a federal health reform requirement that insurers spend at least 80 percent of their premium dollars on medical care.

The exemption sought would apply to health insurance policies for individuals. Without this waiver from federal rules, Hudgens said in a statement Tuesday, “Georgia’s individual health market will become less competitive.’’

Small insurers would exit the individual insurance market, leading to ‘’many thousands of Georgians’’ losing health coverage, said Hudgens, who reiterated his opposition to the federal health reform law.

The Affordable Care Act requires health plans sold in the large-group market to spend at least 85 percent of premiums on medical care.  Those in the small-group and individual markets must  spend at least 80 percent on health costs.

The portion that insurers spend on care is called a ‘’medical loss ratio.’’ Beginning this year, insurers are required to report their medical loss ratio. If companies spend too much on overhead and administrative costs, consumers will receive rebates.

The U.S. Department of Health and Human Services recently granted a waiver on the medical loss ratio rules to Maine insurers, giving them three years to meet the 80 percent mark for individual policies.

Nevada, Kentucky and New Hampshire have similar waiver requests pending.

Cindy Zeldin, executive director of Georgians for a Healthy Future, a consumer advocacy group, said she wanted to examine the data that Georgia is presenting on the individual insurance market. “If it does disrupt the individual market, a waiver may be appropriate,’’ she said.

But Zeldin added, “These rules were written in a methodical, fair way,’’ developed by the National Association of Insurance Commissioners.

The individual insurance market ‘’is a market that’s very expensive for consumers,’’ she said.

Former state Insurance Commissioner John Oxendine also objected to the medical loss rules last year. He said the market for individual health insurance has been historically dominated by Blue Cross and Blue Shield of Georgia, which at one point sold roughly 80 percent of these policies in the state. Oxendine said that smaller plans had nibbled away at dominance of Blue Cross.

Hudgens also said in a statement that he is concerned that the Obama administration has a ‘’fundamental distrust’’ of the role played by insurance brokers and agents.

“It appears to me that the current law is engineered to eliminate the agent from the marketplace by reducing the commissions that can be paid on the sale of a health insurance policy,’’ he said.

Zeldin said the new premium rules don’t eliminate brokers.

“Insurance companies are meeting the 80 percent mark now and still use brokers,’’ she said. “If brokers and agents play a critical role, people will still pay for them.’’