Insurelane Insurance Blog

The federal government turned down the state of Indiana’s request for it to waive new insurance rules on Nov. 28. The rule in question states that insurance companies must spend a minimum of 80 per cent of their revenue from premiums on medical care instead of on things such as administrative costs, salaries, and marketing etc. If the insurers don’t follow the rules then customers are entitled to rebates.

However, the government refused to let the rule slide and this means residents who purchase health insurance on their own instead of through employers will indeed be entitled to rebates starting in 2012 if the rules are broken. The U.S. Department of Health and Human Services made the announcement.

State officials claimed that insurance companies were leaving Indiana due to the new law, but the federal agency replied that there’s no evidence of that happening. The government said there’s no reason to adjust the new rule and it’s in the customers’ best interest that it remains the way it is. According to estimates by the state, Indiana residents would have been eligible for about $24 million worth of rebates last year if the law was in place then.

Stephen W. Robertson, the Commissioner of Insurance for Indiana, wrote in the waiver application that was sent to the government that five insurance companies notified him that they would be withdrawing from the health insurance market in Indiana if the law wasn’t waived.

But the federal government said one of the insurers didn’t even sell individual insurance plans in the state, another didn’t have any active business there and two of them were complying with the rule when they decided to pull out. The fifth company was said to be in financial trouble in several states where it does business. The government concluded that residents wouldn’t lose coverage if these companies left the market.

According to an article by pal-item.com, Indiana’s biggest health insurance provider is WellPoint/Anthem as they cover close to 60 per cent of residents who purchase their own plans. It was reported that they spent 77 per cent premiums on medical care in 2010 and it plans on meeting the 80 per cent requirement. The minimum on premiums sold to large groups is 85 per cent.

So far, the federal government has turned down four state requests waive the law, but has approved the modified versions of six other state requests. In addition, it’s still looking over requests from seven other states.