FRANKFORT — Federal officials have denied Kentucky's request to delay implementation of a portion of the federal health care overhaul bill until 2014.
But officials with the U.S. Department of Health and Human Services did allow Kentucky to delay until 2012 full implementation of the provision that would require insurance companies to spend 80 percent of premiums on paying customers' claims, according to a letter the federal agency sent the state Friday.
Kentucky and 11 other states and Guam had asked federal authorities to delay implementing the requirement in the Patient Protection and Affordable Care Act. The medical loss ratio was born out of concerns that insurance companies were spending too much on executive salaries, marketing and other overhead costs while raising premiums. If an insurance company does not meet the 80 percent ratio, it will be required to forfeit or repay its customers.
Kentucky had asked federal authorities to increase the medical loss ratio gradually, to 65 percent in 2011, 70 percent in 2012, 75 percent in 2013 and 80 percent in 2014. The state Department of Insurance said Kentucky's insurance market was small, and there were concerns that requiring an 80 percent medical loss ratio would result in more insurance companies leaving the state. In 1994, the state overhauled its health insurance laws, resulting in 43 companies leaving the Kentucky market.
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But in a letter to state officials, federal officials said they thought companies operating in Kentucky would be able to meet the 80 percent ratio by next year without substantial losses and disruptions to Kentucky markets. Kentucky insurers will be required to meet the 75 percent medical loss ratio this year and 80 percent next year.
Ronda Sloan, a spokeswoman for the state Department of Insurance, said Friday that the department has not determined whether it will ask federal authorities to reconsider.
Sharon Clark, the commissioner of the Department of Insurance, said in a written statement that she was relieved the U.S. Department of Health and Human Services granted Kentucky insurance companies a one-year grace period.
"We are pleased that HHS recognized that an immediate implementation of an 80 percent standard could destabilize the individual market. We believe allowing a 75 percent requirement for 2011 will assist Kentucky going forward," Clark said.
According to the HHS estimate, Kentucky insurance consumers could receive up to $1.3 million in payments from insurance companies that could not meet the 75 percent medical loss ratio.