The health insurance companies offering individual policies in Kansas are financially solid enough that new federal medical-loss rules won't drive them from the market, state and federal regulators predicted today.
That prediction came as the U.S. Department of Health and Human Services denied a waiver request from the Kansas Insurance Department that would have temporarily relaxed the rules for firms operating in the Sunflower State.
"We were not surprised" that HHS rejected the petition, said Kansas Insurance Commissioner Sandy Praeger in reaction to the news announced Wednesday morning by federal officials, who also said they had rejected a similar waiver sought by the Oklahoma insurance department.
"I think the bottom line is that our companies — even if they have to give some refunds for 2011 — are not going to be financially impaired as a result of the 80-20 rule," Praeger said.
The Affordable Care Act, the federal health reform law of 2010, required that health insurance companies beginning in 2011 spend 80 cents of every premium dollar collected from customers on medical care for the policyholders. Companies that fail to meet the standard will be required to pay customer rebates.
Steve Larsen, director of the HHS Center for Consumer Information and Insurance Oversight, said denial of the Kansas waiver request meant that about 35,000 Kansas policyholders would share about $6 million in rebates for 2011 that should show up in their mailboxes by August 2012.
"We determined the insurance companies in Kansas in the individual market are able to meet the standard or will in the near future," Larsen said during a teleconference with news reporters. "If they aren't meeting it … we did not conclude that this market would be destabilized. We don't foresee that any insurance companies in the state of Kansas would withdraw as a result of the 80-20 rule."
In a later interview with KHI News Service, Praeger agreed with Larsen's assessment.
The state's two dominant health insurance companies, Blue Cross Blue Shield of Kansas and Blue Cross Blue Shield of Kansas City, already meet the 80-20 standard with their individual policies or are close to meeting it, HHS officials said.
HHS letter rejecting medical loss waiver
Blue Cross of Kansas, which had 46.4 percent of the market in 2010, reported a medical loss ratio of 88.8 percent.
"We're well within the 80-20 and are comfortable that in the foreseeable future we will have no problem operating in the 80-20," said Mary Beth Chambers, spokesperson for Blue Cross of Kansas. "We're comfortable with the medical-loss ratio."
Blue Cross of Kansas City, the second largest insurer, reported a medical loss ratio of 79.4 percent but is making changes expected to soon put it within the new standards, according to HHS officials.
Four of the state's issuers failed to meet the standard in 2010, according to HHS: Coventry, Time, Golden Rule and Humana.
HHS officials said those companies would need to lower their premiums and pay out more in medical expenses and quality improvement or expect to pay customer rebates.
"In sum, evidence shows that all issuers in the Kansas individual market either already meet the 80 percent (Medical Loss Ratio) standard, or are adapting their business models in order to continue to achieve sustainable financial performance in that market, as well as to comply with, and benefit from, the provisions of the Affordable Care Act," Larsen wrote in the letter rejecting the waiver request.