Georgia has become the sixth state to apply for a waiver of the medical loss ratio (MLR) requirements of the Patient Protection and Affordable Care Act (PPACA). The MLR rule requires individual health insurance plan issuers to spend at least 80% of premiums, and large group plans to spend at least 85% of premiums, on medical care or quality improvements. Georgia seeks a waiver for 2011, 2012 and 2013.

In a letter to the U.S. Department of Health and Human Services, Georgia Insurance Commissioner Ralph Hudgens said that the waiver would help avoid destabilizing the insurance market in Georgia. There is 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 less than 15 or 20% of the premium dollar, they will be unable to operate profitably and may exit the market. "Many thousands of Georgians will lose their current insurance coverage as smaller insurers make difficult decisions to exit the individual market rather than to continue in it at a loss," Mr. Hudgens wrote.

Last week, Florida became the fifth state to apply for a waiver of the MLR requirements, joining New Hampshire, Nevada, Kentucky and Maine (the only state to receive a waiver thus far). In states that do not obtain a waiver, plans that do not meet the percentage requirements must refund the difference to policyholders beginning in 2012.