Analysts call Florida's request to waive medical loss ratio requirements weak

After reviewing Florida's request that tough new medical loss ratio requirements for insurers be waived, Citi analysts said the waiver request is weak.

Medical loss ratios are requirements that health insurers spend a certain amount on direct care for patients. Insurance Commissioner Kevin McCarty has written a letter to the U.S. Department of Health and Human Services saying that the ratios mandated in federal health care reform would cause insurers to leave the state and would cause problems for consumers.

But in a 13 page investment brief published March 16, Citi said the six largest individual carriers that control over 85 percent of the market share haven't announced plans to drop out if medical loss ratios are implemented. Granting the waiver, the report notes, would jeopardize substantial rebates-- $60 million had the rebates been in effect in 2010.

"With most of the market stable, it's hard to see how giving away $60 million in premium rebates is a good thing for consumers. Put a little differently, if [the federal government] grants this waiver to Florida, it's hard to come up with a situation where a waiver request wouldn't be granted."

Office of Insurance Regulation spokesperson Jack McDermott said the office is "confident" that the waiver request to the federal government "adequately outlines our reasoning."

"This application relies on information obtained from two evidentiary hearings that included industry testimony -- from both small and large carriers,'' McDermott said. "At this time, we do not want to join Citibank in speculating how HHS will analyze our application or predict what HHS will decide."

McCarty expressed concerns with the MLR requirements and held two public hearings in early and late summer. There, he took sworn statements from insurance carriers and started laying the groundwork for his waiver request.

After Gov. Rick Scott -- who campaigned against the federal health care bill -- was elected, McCarty stopped work on the waiver request. And when federal Judge Roger Vinson declared the law unconstitutional, McCarty's office said there was no need for the waiver.

But Vinson stayed his ruling, which triggered McCarty's waiver request. McCarty said he was seeking the waiver "in an abundance of caution and in order to create and maintain the stability of Florida's individual health insurance marketplace."

McCarty's move came on the same day that Attorney General Pam Bondi asked for an expedited appeal of Florida's lawsuit challenging health care reform.

Health Care for America Now Executive Director Ethan Rome criticized Florida politicians and their responses to the federal health care overhaul.

"They  are not interested in following the law, but when they need to get a waiver from part of the law that would help consumers, they seek it," said Rome, whose association promotes universal, affordable, quality health care.