The federal government has rejected a request by Texas to be excluded from a new law that limits how much health insurance companies can spend on overhead.
The law is part of the Affordable Care Act, changes made in federal health care law in 2010 that Texas officials say is unconstitutional. Part of the bill requires health insurers to spend at least 80 percent of their revenue on providing health care or health improvement programs. Those that spend more than 20 percent on overhead and executive salaries will be required to give rebates to customers starting this year.
Federal officials at the Department of Health and Human Services said Texas did not prove that the state’s insurance market would be destabilized by the new law. As a result, Texas health insurers will likely pay out $476 million in rebates over the next three years, said Gary Cohen, acting director of oversight at the agency.
“We have determined that no adjustment to the 80-20 rule in Texas is warranted,” Cohen said. “This means that consumers in Texas will get the full benefit of the Affordable Care Act.”
The Texas Department of Insurance issued a statement rejecting the federal agency’s conclusions, saying it did not give insurance companies time to adjust their business models to new rule.
“A reasonable, responsible phased-in approach would still have afforded rebates to Texas consumers without risking disruption, dislocation and withdrawal of carriers,” the department said in a statement.
The Texas insurance commissioner applied for a waiver from the law in July and asked for permission to allow Texas companies to gradually lower the spending requirement for health services to 71 percent in 2011, 74 percent in 2012 and 77 percent in 2013.
Seventeen states have applied for waivers, and after Friday’s Texas decision, two are pending. Nine states, including Texas, have been denied. Six states have been granted a waiver, although in most cases the agency did not give the state as much as it wanted.
The states granted a waiver include four with Republican governors: Maine, Nevada, Georgia and Iowa. The states denied include one with a Democratic governor, Delaware. Florida was denied a waiver. Gov. Rick Scott, like Gov. Rick Perry is a big opponent of Obama’s health care law.