The Obama administration on Monday rejected two states’ requests for waivers from the healthcare reform law.
The decision could rekindle the controversy over the waiver process, as the two states that were turned down, Indiana and Louisiana, have Republican governors. GOP leaders at the state level have been extremely critical of the healthcare law and the requirements that it imposes on states.
The Department of Health and Human Services said Indiana and Louisiana do not need an adjustment from the health law's medical loss ratio. That provision requires insurers to spend at least 80 percent of premiums on medical care or offer rebates to their customers starting next year.
The agency determined that the health plans of Indiana and Louisiana can meet the threshold and that consumers will get better value without an adjustment, said Gary Cohen, acting director of oversight at the HHS Center for Consumer Information and Insurance Oversight.
Indiana had asked for a 65 percent ratio in 2011; 68.75 percent in 2012; and 72.5 percent for 2013. Cohen said the state's health plans did not need the adjustment because they're either already meeting the 80 percent threshold, could meet it without becoming unprofitable or are already changing their business model to be able to meet it.
Louisiana had asked for a 70 percent threshold in 2011 and 75 percent in 2012. HHS said that request was based on preliminary data showing that the aggregate medical loss ratio among nondominant plans was 67 percent for 2010, while updated figures showed that figure to be 79 percent.
Indiana had also requested an adjustment of 76.25 percent for 2014, a permanent waiver for high-deductible "consumer-driven" health plans in the individual and small group markets, and a waiver for new individual market entrants until 2014. HHS said it does not have the authority to grant such waivers.
The state's broad request had sparked outrage among consumer advocates.
"Indiana's application is based on state politicians' ideological opposition to health reform, not the realities of the state's health care market," Consumer Watchdog wrote in public comments urging HHS Secretary Kathleen SebeliusKathleen SebeliusSebelius on GOP healthcare plan: 'I'm not sure what the goal is here' Obama's health secretary to be first female president of American University Leaked email: Podesta pushed Tom Steyer for Obama’s Cabinet MORE to reject the application. "As the MLR regulations make clear, there must be a credible threat to the stability of the individual marketplace in order to grant a waiver. Indiana has demonstrated no such threat."
The state, however, says it needs a special exemption for high-deductible healthcare plans because they're a growing segment of the insurance market among employers searching for options to clamp down on costs. Indiana has the fifth highest percentage of workers in such plans (8.1 percent of the population, or 365,000 people).
"In particular," the state's application points out, "73 percent of Indiana's nearly 29,000 state employees (excluding public university employees) participate" in such plans.
To date, HHS has granted waivers to six states: Maine, New Hampshire, Kentucky, Nevada, Iowa, Georgia. The department has denied them to Delaware and North Dakota.
The department is currently reviewing applications from seven other states: Florida, Kansas, Michigan, Texas, Oklahoma, North Carolina and Wisconsin.
Guam had also applied for a waiver, but HHS determined the U.S. territory's insurers were so small they don't have to comply with the new rules.
Correction: This post was corrected to reflect that Wisconsin's application is still pending.