Consumer Watchdog Asks Obama Administration to Deny Florida Request to Evade Health Reform Limits on Insurer Profit and Overhead That Would Void a key Consumer Protection Nationwide

WASHINGTON, Oct. 27, 2011 /PRNewswire-USNewswire/ -- Consumer Watchdog told the Obama Administration that Florida's bid to escape a key consumer protection rule in the health reform law cannot be justified and joined calls for the Department of Health and Human Services (HHS) to hold a public hearing into the state's effort to evade minimum medical spending rules.

The federal health reform law's "medical loss ratio" rule requires health insurers to become more efficient and spend at least 80% of consumer premiums on health care, not excessive overhead, salaries and profits. Florida is seeking a waiver of the medical loss ratio rule.

The application submitted by Florida, where Governor Rick Scott and Insurance Commissioner Kevin McCarty are prominent political opponents to the health reform law, is the most unjustifiable of all the applications HHS has received, said Consumer Watchdog. In the group's letter to HHS, it concluded: "If Florida is granted a waiver, any state would qualify. You will have eliminated the high bar – serious market disruption – against which waivers should be measured."

"Florida is using the MLR waiver process, intended to protect consumers if insurance availability is threatened, as a purely political tool," said Consumer Watchdog research director Judy Dugan, who examined the state's waiver application.

"Florida's application is just the latest play in efforts by Gov. Scott and Commissioner McCarty to kill health reform by a thousand cuts. A public hearing to examine the facts will show the state's claims don't stand up to public scrutiny," said Carmen Balber, Washington director for Consumer Watchdog.

With at least 19 companies reporting active business in Florida's individual health insurance market, including five with more than 40,000 people covered, the state has a robustly competitive health insurance market in comparison to most states. The only effect of a waiver would be to let health insurance premiums continue to rise unreasonably and deprive Floridians of rebates they would be due from inefficiently run insurance companies, said Consumer Watchdog.

See Consumer Watchdog's letter at http://www.consumerwatchdog.org/resources/ltr_hhs_florida_mlr_waiver_10252011.pdf

See all documents related to Florida's waiver request at http://cciio.cms.gov/programs/marketreforms/mlr/mlr_florida.html

The letter noted that the average 2011 medical loss ratio in Florida under the rules of the Affordable Care Act will be 76.6% as calculated by HHS--very close to the law's minimum of 80%. Yet Florida is demanding an exception that would allow its insurance companies to spend as little as 68 cents of every premium dollar on health care for the next three years. The state has failed to show that any health company would leave the market because of the medical spending rule.

Any move toward granting a waiver to Florida would abdicate the administration's responsibility under the health reform law to increase the affordability of health insurance for consumers, said Consumer Watchdog.

Florida's application also argued that its insurance brokers would quit the state because insurance companies are reducing broker commissions to avoid paying rebates to consumers. These claims were debunked in a 2011 study by the National Association of Insurance Commissioners that studied states with similar MLR rules and found no indication that brokers had fled those states.

Florida Insurance Commissioner McCarty is promoting legislation that would further undermine the medical loss ratio rule by raising the pay of insurance brokers at the expense of consumers.

Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org.

SOURCE Consumer Watchdog