Recently, the U.S. Department of Health and Human Services (“HHS”) rejected North Dakota’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.  As we previously reported, under the PPACA, the medical loss ratio (MLR) requirement is 80% for individual and small group plans and 85% for large group plans. Many states, concerned that insurers will exit their states because such insurers are unable to meet the MLR requirement, requested a phase-in period or temporary waiver from the new requirement for individual and small group plans.

North Dakota requested the following phase-in period: 65% for 2011, 70% for 2012 and 75% for 2013 before meeting the 80% requirement in 2014. HHS determined, however, that several of North Dakota's largest health insurance companies are already meeting or close to meeting the 80% MLR requirement.  As such, regulators did not believe that insurers are at risk of leaving the market.

HHS, however, announced that Kentucky’s and Iowa’s requests for waivers from the MLR requirement were approved with modifications.  Kentucky requested the following phase-in period: 65% in 2011, 70% in 2012 and 75% in 2013 before moving to 80% in 2014.  Iowa requested the following phase-in period: 67% for 2011, 75% for 2012 and 80% for 2013 and beyond.  For both states, HHS approved a modified phase-in of 75% in 2011 and 80% in 2012 and thereafter.

North Dakota is the first state whose waiver request was not granted.  To date, HHS has approved five (5) states for a waiver: Maine, New Hampshire, Nevada, Kentucky and Iowa. Seven other jurisdictions' requests for similar phase-in periods are pending: Indiana, Delaware, Kansas, Georgia, Florida, Louisiana and Guam.