State Health Care Waiver Shows Law's Flexibility, Not Failure

April 05, 2011 9:15 am ET — Meredith Kormes

As the Affordable Care Act continues to be implemented around the country, various provisions in the law are coming to the forefront. Predictably, no matter how beneficial these provisions are to American families, Republicans are taking every opportunity to fight against implementation. The latest example of this fight is over the Medical Loss Ratio (MLR) provision in the law. 

The MLR is a tool used to ensure that health insurance plans spend a significant percentage of premium dollars on providing health care and improving the quality of care, compared to what they spend on administrative, overhead, and marketing costs. At the beginning of this year, the MLR provision went into effect and requires insurance companies to spend at least 80 to 85 percent of premiums on patient care. If insurance companies do not follow those regulations, they are required to provide rebates to their customers. States can apply for waiver from this provision if they can show that meeting the 80 percent  MLR "may destabilize the individual market" in that state.

In March, Maine became the first state to receive a three-year waiver to the MLR provision. The waiver allows Maine to maintain its current 65 percent standard until 2014. Republicans point to the waiver as an admission by HHS and the administration that the health care law does not work and that all states should receive a waiver. But in reality, the MLR waiver shows the flexibility of the law and gives states more control over their affairs. 

The MLR provision (and the corresponding waiver) only impacts the individual insurance and small-group market. Maine has just three health insurance companies that cater to the individual, non-group coverage market, and the state feared one of the companies would leave the market if the MLR provision was implemented.

Frequent critics of the Affordable Care Act claim the health care waivers are proof that the law is flawed and failing. Rep. Michele Bachmann (R-MN) called the waiver "an admission of failure." And Sen. John Barrasso (R-WY) said on the Senate floor:

And now we see that the state of Maine, the entire state of Maine has been given a waiver. Well Madame President, I come to the floor today, a year after this has passed into law, and I say everybody in the country ought to be able to get a waiver, an opt-out of this health care law. Opt-out completely. These are decisions that should be made at the state level, at the local level. Washington's one-size-fits-all has hardly ever worked for anything and it sure doesn't work for health care.

But what neither of them seem to understand is that the waivers provide states with the flexibility they need for the next few years until the law is fully implemented and the health care exchanges are up and running in 2014.

In granting Maine a waiver, HHS provided the state with the flexibility it needed to maintain its individual non-group coverage market. HHS agreed that the "application of the 80 percent MLR standard in Maine has a reasonable likelihood of destabilizing the Maine individual health insurance market." As the HHS letter noted, the decision was "rooted in the particular circumstances of the Maine insurance market." Contrary to what Republicans say, it is the exact opposite of a "one-size-fits-all" mentality.

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