The U.S. Department of Health and Human Services has granted the State of Maine's request for a waiver of the Patient Protection and Affordable Care Act (PPACA) requirement that individual health insurance plan issuers spend at least 80% of premiums on medical care or quality improvements. Under PPACA, the medical loss ratio (MLR) requirement is 80% for individual and small group plans and 85% for large group plans; the adjustment granted for Maine reduces the former to 65%. Maine is the first state to receive an adjustment to the rule.
The federal government's letter to Mila Kofman, Maine's superintendent of insurance, stated, "We agree with the reasoning that led to the [Maine Bureau of Insurance's] conclusion that application of the 80 percent [MLR] standard in Maine has a reasonable likelihood of destabilizing the Maine individual health insurance market." The conclusion is based on concern that if insurers are forced to reduce their expenses and profits (i.e., all uses of funds other than the provision of care) to a total of 20% or less of the premium dollar, they will be unable to operate profitably and may exit the market. Under PPACA, plans that do not meet the MLR requirements must refund the difference to policyholders beginning in 2012.
On March 14, Florida became the fifth state to apply for a waiver, joining New Hampshire, Nevada, and Kentucky in addition to Maine. In its petition, the Florida Office of Insurance Regulation wrote that delaying the effectiveness of the rule until full implementation of PPACA in 2014 "will allow insurers to prepare for a smooth glide to the new realities of 2014 rather than falling off a cliff and hobbling there on crutches." New Hampshire, Nevada, and Kentucky have also applied for adjustments and other states, including Iowa, have said that they would seek one.