HHS Allows Obamacare Modification in Only 7 of the 17 States That Requested One

By Susan Jones | February 17, 2012 | 11:42 AM EST

Health and Human Services Secretary Kathleen Sebelius (CNSNews.com/Penny Starr)

(CNSNews.com) - The Democrats' health care law requires insurance companies to spend at least 80 percent of their premium dollars on health care, and no more than 20 percent on overhead and administrative costs -- unless the Obama administration grants an "adjustment" or waiver.

Insurance companies that do not meet the 80/20 standard (also called a medical loss ratio) are required to pay rebates to their customers this year -- unless those companies are located in states that received waivers from HHS.

Obamacare allows Secretary Sebelius to "adjust the medical loss ratio" for a state -- if meeting the 80/20 rule would "destablize the state's individual insurance market."

HHS on Thursday said it had concluded its review of 17 states -- more than a third of the nation -- that requested a waiver. Ten states were denied waivers, and seven were granted "adjustments," as HHS calls them.

The 10 states denied Obamacare waivers include Florida, North Dakota, Louisiana, Kansas, Indiana, Michigan, Texas, Oklahoma, Wisconsin, and Delaware. All but Delaware have Republican governors.

The seven states granted waivers, or modifications in their medical loss ratios, include Iowa, New Hampshire, North Carolina, Maine, Nevada, Kentucky, and Georgia. Three of those states have Democratic governors, and four are led by Republicans.

In her announcement, Sebelius said the adjustment determinations "were made as a result of a transparent and data-driven process." She noted that the documentation related to each state's request has been publicly posted.

Sebelius said the new rebate rule has "saved" consumers up to $323 million -- all "part of the Obama Administration’s effort to increase transparency in the health insurance marketplace."

America’s Health Insurance Plans (AHIP), the national association representing approximately 1,300 health insurance plans, says the medical loss ratio requirements impose "an unprecedented new federal cap on the administrative costs of health plans, strictly micro-managing their ability to invest in new initiatives and innovations to benefit their enrollees.

"This policy will have a number of unintended consequences for individuals, families, and employers," AHIP officials told a congressional panel last June.

Also on Thursday, Health and Human Services Secretary Kathleen Sebelius announced that consumers can find out if their insurance company has met the new 80/20 standard by checking the list posted on HealthCare.gov. She said the Obama administration also may require insurers to notify consumers directly.