U.S. Denies Bids for Waivers From Health-Law Spending Rule

Federal officials denied requests from Indiana and Louisiana to allow insurers in those states to avoid a health-care law requirement they spend at least 80 percent of premium revenue on patient care.

The U.S. Department of Health and Human Services concluded insurers in the states were already meeting the standard or were profitable enough to accommodate the higher spending, said Gary Cohen, acting director of oversight for the Center for Consumer Information and Insurance Oversight.

“We decided that no insurers would be forced to leave the market if the waiver wasn’t granted,” Cohen said.

Seven more states, including Florida and Texas, are awaiting rulings on similar waiver requests. The administration has granted some form of waivers to six states while four state requests have been denied, including today’s decisions, according to a list posted by the agency on its website.

The spending rule was intended to ensure a specified portion of money paid to buy health-care coverage would be spent on medical treatment and quality improvements rather than on company overhead.

The law requires insurers who fail to meet the benchmark to pay rebates to patients. Overhead includes administration charges, salaries and profit.

WellPoint Loses

In Indiana, WellPoint Inc. (WLP), the largest U.S. health insurer by enrollment, would have benefited most from a waiver because it represented more than 60 percent of the market for individual policyholders in the state at the end of last year, according to data in the letter from the federal agency.

Golden Rule Insurance Co., a subsidiary of UnitedHealth Group Inc. (UNH), is the next biggest, controlling 9.5 percent of the market.

The biggest publicly traded insurer in Louisiana’s individual market is Humana Inc. (HUM), the second largest provider of Medicare managed care plans in the U.S., with a 6.3 percent share.

The Indiana Department of Insurance is reviewing the decision and determining whether to respond, Logan Harrison, a spokesman, said in a telephone interview. Officials in Louisiana didn’t respond immediately.

To contact the reporters on this story: Pat Wechsler in New York at pwechsler@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

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