Recently, there was a law put into place that required all health insurance companies to spend at least 80% of the money that they get from premiums on things that are actually beneficial to the health of their customers. However, the federal government has granted a waiver of this requirement for the entire state of Maine. Could this mean that other states could have the requirement waived, too?
The United States Department of Health and Human Services created a requirement that applied to all companies that sell health insurance. They would have to spend a minimum of 80% of the money that they receive from their customers on things that could reasonably be considered as something that would improve the health of those customers. This means that the 80% could include things like preventative care, and the medical care that a customer’s doctor recommends.
Previous to this requirement, some insurance companies were spending a much lower percentage of the money that came from their customers on things that would enhance the health of customers. Some companies were taking a big chunk of those dollars as profit, instead. The new requirement prevents insurance companies from pushing things like administrative costs, employee salaries, and federal and state regulatory fees into the 80%. Many insurance companies expressed displeasure about this.
Today, the United States Department of Health and Human Services (HHS) has issued a letter that says that the 80% requirement has been waived for the state of Maine. The HHS will allow insurance companies in Maine to spend 65% of the money that comes from premiums on medical care for their customers. Why 65% instead? This is the percentage that insurance companies in Maine are currently using.
It seems that the reason why Maine got this waiver is because there is the fear that one of the three major insurance companies in Maine, MEGA Life and Health Insurance Co., will choose to withdraw from the market, entirely, if they have to meet the 80% requirement. MEGA Life and Health has about 37% of the insurance market in Maine. If they leave the market, this could potentially destabilize the entire individual health insurance market in Maine.
The HHS didn’t want this to happen. It’s obvious that a destabilized health insurance market is not going to be beneficial to the people who live in Maine. It would cause a lack of competition.
Kentucky, Nevada, and New Hampshire have also requested a waiver of the 80% requirement. Right now, those waivers are pending. States are allowed to petition for permission to delay having to meet the 80% standard until 2014, when the health insurance exchanges are intended to exist.
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