The federal government has denied a request by the Michigan Office of Insurance Regulation to delay a regulation under health care reform that requires insurers to return $89 million to people who have purchased health insurance.
The decision means that eight health insurers in Michigan will return the $89 million to their subscribers, said Gary Cohen, acting director of oversight with the Center for Consumer Information and Insurance Oversight at the U.S. Department of Health and Human Services.
"After careful consideration, the evidence does not establish reasonable likelihood (that the regulation would) destabilize the market," Cohen said in a conference call this afternoon.
"Most issuers are profitable or would be profitable once they adjust their business model" to spend 80 cents of each health care dollar on health care or related costs, Cohen said.
In a letter to Snyder administration (PDF), the CCIIO told them they found no reason to grant the Michigan Office of Insurance Regulation's (MIOR) request to delay and phase in the requirement that insurers use at least 80% of their revenues on actual health care and that the rebates should continue as scheduled if the insurers don't get in line.
As described at the outset of this letter, section 2718 of the PHS Act permits the Secretary to adjust the 80 percent standard in the individual market if it is determined that applying this standard “may destabilize the individual market in [the] . . . State.” The regulation implementing section 2718, 45 CFR Part 158, provides that an adjustment should be granted “only if there is a reasonable likelihood” that application of the 80 percent MLR standard will destabilize the particular State’s individual health insurance market (45 CFR 158.301).
After applying the standards and criteria set out in section 2718 and 45 CFR Part 158 to the information submitted by OFIR, we conclude that the evidence presented does not establish a reasonable likelihood that implementation of an 80 percent MLR standard may destabilize the Michigan individual market. We reach this conclusion for the reasons outlined in the analysis under the criteria set out above, and based on the specific characteristics of the Michigan individual market addressed in that analysis.
“What we found: some insurance companies, based on their estimates to the Michigan insurance department, might be paying rebates in 2011, but they would still be profitable after paying rebates,” Gary Cohen, acting director of oversight for CMS' Center for Consumer Information and Insurance Oversight, said during a call with reporters. “Others said they were adjusting business practices so they would be able to meet the 80-20 rule without having to pay rebates,” he continued. “So we reached conclusion that no adjustment was needed.”
In other words, they found that the handful of companies that are complaining are doing just fine, thank you very much, and the rebates will still allow them to be profitable. The MIOR was asking that they be allowed to phase in the requirement, requesting "an adjustment of the MLR standard to 65 percent, 70 percent, and 75 percent for the reporting years 2011, 2012, and 2013, respectively." No, the Feds told them. They will meet the 80% requirement in 2011 or pay the rebates. According the Crane piece, "[b]ased on 2010 data, estimated rebates paid by Golden Rule would total $10 million, Time would pay $5.3 million, Aetna $1.7 million, Humana $1.3 million, Priority Health $200,000, and MEGA at $2.6 million."
The upshot of this is that the Affordable Care Act is, in fact, working. It's forcing insurance companies to actually deliver services and not embiggen their bank accounts at the expense of sick and injured Michiganders. The CCIIO found that companies are adjusting their business models to be more efficient at delivering services and, surprise, surprise, still making a buck or two along the way anyway.
Put this one in the "win" column for the Obama administration's health insurance reform and the Affordable Care Act.