A health care waiver request state officials say would benefit smaller insurance carriers and Oklahomans living in rural areas is now in the fact-gathering stage, according to Insurance Commissioner John Doak.
Doak, who announced the state was seeking the waiver last month, said it's under review by the U.S. Department of Health and Human Services. He said the federal agency sent a list of follow-up questions to his department and those are in the process of being researched.
The waiver is being sought to combat a key provision in the Patient Protection and Affordable Care Act, which mandates that 80 percent of individual and small group insurance premiums be spent on actual health care activities — not administrative costs, which can include commission payments to insurance agents. The concept in question is referred to as medical-loss ratio by industry professionals and elected officials.
Today, the standard medical-loss ratio is roughly 65 percent.
The waiver, which Doak formally requested on Aug. 30, would allow insurance companies operating in Oklahoma to phase in the changes incrementally over the course of three years, instead of all at once.
Doak said he believes the waiver request is warranted in Oklahoma, despite the fact that other states have had their pleas for more time rejected by the federal agency.
“If granted, the waiver would provide stability and sustainability of the individual insurance market during a period, 2011 to 2014, during which the rules have not been completely defined and confusion remains commonplace,” Doak said.
“I've reviewed the data received from the carriers and have listened to the producer community, which supports the waiver and concludes that the request would be beneficial to both the insurance industry and to consumers in Oklahoma.”
According the commissioner's office, U.S. Secretary of Health Kathleen Sebelius has 30 days to approve or reject the waiver request once it's deemed complete by her agency.
Catherine Garrett, who sells health insurance products in northwest Oklahoma, says she's already seen the effects of the pending medical-loss ratio change.
The owner of a small insurance agency in Enid, she started seeing a decline in her commissions last October.
“In some cases we're losing 10 whole points — and I don't mean percentage points,” Garrett said. “If you're talking about 20 percent taken down to 10 percent, that's a 50 percent decline in commissions.”
Because of the looming changes, she said many “smaller” insurance companies are fleeing — or have already fled — the Oklahoma market.
“That's the biggest problem,” Garrett said. “Because a lot of these smaller companies — and when I say small, I mean they're not trillion-dollar companies on Wall Street — offer better discounts and better options than the big guys, but they're dropping out of the
Doing business in smaller cities like Watonga, Canton, Kingfisher and Hennessey, she said it's harder for rural residents to get individual health insurance coverage in general. These customers also are typically afforded fewer options, a problem Garrett believes will be exacerbated by looming ratio changes.
“I think that will hurt our customers ... having policies that are cookie-cutter, with fewer options,” she said. “Now a policy with United Healthcare looks the same as one from Humana, which are two of the biggest companies out there.”
Garrett said she supports “all Oklahomans having health care,” but remains wary of reducing competition for large, multinational corporations selling insurance products in Oklahoma.
“They're there to maximize shareholders' wealth,” Garrett said, “not pay claims.”
Other states seek waiver
In addition to Oklahoma, 15 other states and the territory of Guam have requested a waiver on the looming medical-loss ratio changes. Maine, New Hampshire, Nevada, Kentucky and Iowa have all had waiver requests approved by the U.S. Department of Health and Human Services in recent months. Along with Oklahoma, Florida, Texas, Georgia, Indiana, North Carolina, Mich