State Insurance Commissioner Ralph Hudgens said he was looking out for consumers when he asked the Obama administration to delay a requirement that health insurers spend 80 percent of the money they collect from customers on claims, as opposed to salaries, marketing and other overhead.
But 17 Georgia consumer organizations have objected to Hudgens' request, saying that giving insurers more time to comply with the federal rule will rob Georgians of the value they should be getting from their health plans. Most Georgia insurers would not meet the threshold based on data submitted by the insurance commissioner's office.
"We know that health insurance is expensive," said Cindy Zeldin, executive director of Georgians for a Healthy Future, one of the groups. "Consumers are really stretching their household budgets to buy coverage and they deserve to know how those premium dollars are being spent."
Hudgens argues that enforcing the new requirement would hurt Georgians by driving some insurers out of the individual market. That could decrease competition and also leave consumers with pre-existing conditions unable to buy insurance coverage elsewhere, the commissioner argued in his request to the administration.
The waiver request will have implications for about 350,000 Georgians who buy their own health insurance. If the new rule stands, Georgia consumers would be in line to get as much as $42 million in rebates from insurers who do not meet the standard over the next three years, according to estimates by the commissioner's office.
Hudgens seeks a waiver that would allow the 80 percent standard be phased in, with a threshold of 65 percent this year, rising to 80 percent by 2014.
If the waiver is granted, rebates would fall to an estimated $8.4 million -- or less.
Plans that cover individuals and small groups must spend 80 percent of premiums on claims for hospital bills, doctor visits and other care, under the requirement, which is part of the federal health care overhaul. The "medical loss ratio" standard rises to 85 percent for large group plans. States can request waivers only for the small group market.
Reports for 2010 show that most Georgia insurers spent between 50 percent to just over 80 percent on claims for individual plans, according to data filed with the U.S. Department of Health and Human Services.
"We're not asking that the (80 percent) standard be thrown away, we are simply asking for it to be implemented in a graduated manner," said Trey Sivley, assistant director of the regulatory services division at the Georgia Department of Insurance.
The consumer organizations say requiring the insurers to spend 80 percent of their premium dollars on care makes sure that customers get what they pay for, instead of pumping up executive pay, marketing budgets, commissions and profits. Plans that can't meet that threshold do not represent a good value, the consumer groups argued in a letter sent last week to Health and Human Services Secretary Kathleen Sebelius.
The public comment period on the request ended Monday.
Among other groups signing onto the letter were Georgia Watch, a statewide consumer group, along with representatives of AARP, the League of Women Voters and the American Heart Association
If the phase-in isn't approved, Hudgens' top staff members fear a decline in insurers would bring more calls from Georgians who can't get coverage because of an existing health problem -- already a common complaint.
"You don't want to do anything that puts other people in that predicament," said Jim Beck, Hudgens' chief of staff.
Whether the requirement really would drive insurers out of Georgia is the issue of highest interest to those in Washington who will make the decision. Georgia and 15 other states have requested waivers on the loss ratio requirement.
More than half of the waiver requests are still pending. In most cases already decided, HHS has granted waivers, but often not at the levels requested.
Holly Lang, of Georgia Watch, said the commissioner's office did not make a convincing argument for the waiver.
"We haven't seen any indication that insurers are going to leave the state," she said, "and many insurers are already close to the standard."
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