HHS rejects North Dakota health waiver, approves two others

North Dakota on Friday became the first state to be denied a medical loss ratio waiver under the healthcare reform law.

Federal regulators announced that they have rejected North Dakota's request to be exempted from that provision of the healthcare reform law. Two other requests, from Iowa and Kentucky, were partially approved.

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The waiver requests are for an exemption from the law's medical loss ratio (MLR), which requires health plans in the individual and small-group markets to spend no more than 20 percent of premiums on administrative costs or give customers a rebate. The law allows states to get a waiver if the MLR requirement would disrupt their insurance market.

In the case of North Dakota, the Department of Health and Human Services said, the state's three large carriers subject to the MLR are already meeting or close to meeting the threshold and are not at risk of leaving the market.

"The bottom line is the market is in good shape," said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight.

Iowa plans will be allowed to spend up to 33 percent of premiums on administration in 2011 and 25 percent in 2012, and will have to meet the law's 20 percent threshold in 2013 and thereafter. Kentucky plans get to spend up to 25 percent of premiums on administrative costs in 2011 and have to meet the law's default standard starting next year.

Applications from Maine, Nevada and New Hampshire had already been approved. Another seven are pending.