The state's insurance regulator wants to exempt health insurance companies from the new federal requirement that they spend 80% of premiums on medical care.
The Office of the Commissioner of Insurance has asked the federal government for approval to phase in the new regulation over three years for health plans sold to people who buy health insurance on their own.
In his request, Commissioner Ted Nickel contends that requiring health insurers to spend 80 cents of every dollar on medical care could force some companies to exit the market, potentially harming consumers.
Six of the 24 companies that sell insurance in the individual market could be affected by the federal regulation, according to the Office of the Commissioner of Insurance.
Federal health care reform requires health insurers to spend 80% of premiums on medical care for health plans sold to individuals and to small employers. Health insurers that don't meet the threshold would have to pay rebates to their customers.
Nickel proposed a threshold of 71% this year, 74% next year and 77% in 2013.
Rep. Jon Richards (D-Milwaukee) was quick to criticize Nickel and Gov. Scott Walker's administration for putting insurance companies' interests ahead of consumers.
"During these times when we are trying to reduce health care costs, we should be siding with consumers," Richards said.
About 184,000 people in Wisconsin have health insurance that they or their families bought on their own.
Most of the health insurers based in Wisconsin said last year that they would not have any problem meeting the new federal regulation. Nearly all of them are owned by nonprofit health care systems or clinics.
WPS Health Insurance - which has the largest share of the market for individual insurance - also is nonprofit. It, too, has said it will not be affected by the new regulation
'Numerous obstacles'
Nickel, the insurance commissioner, has a different outlook.
"It is clear that health insurers participating in the Wisconsin market face numerous obstacles in meeting the required 80% (medical-loss ratio)," Nickel wrote in his letter to the Department of Health and Human Services.
His office cited six companies in the individual market that spent less than 80% of premiums on medical care last year.
They are: Humana Insurance Co., a unit of Humana Inc.; Golden Rule Insurance Co., a unit of UnitedHealth Group Inc.; Time Insurance Co., a unit of Assurant Health; Mega Life & Health Insurance Co., a unit of HealthMarkets Inc.; and American Republic Insurance Co. and its affiliate, World Insurance Co.
The companies spent from 65 cents to 72.9 cents of each dollar in premiums on medical care, according to the Office of the Commissioner of Insurance. Combined, they have about 35% of the market for individual insurance.
"When you are looking at 35% of the market, you want to avoid as much turbulence as possible," said J.P. Wieske, a spokesman for the insurance commissioner.
Wisconsin has the most competitive market in the country for health plans bought by individuals and families, according to an analysis released this month by the Kaiser Family Foundation. Consumers would not lack for other options if a health insurer left the Wisconsin market.
Wieske said people with pre-existing medical conditions could get coverage only through the state's Health Insurance Risk-Sharing Plan, known as HIRSP. The insurance commissioner's office does not know how many people this would affect.
In his letter, Nickel also cited the potential effect on insurance agent commissions.
"We are just trying to ease the problems that we foresee down the road," Wieske said.
But Robert Kraig, executive director of Citizen Action of Wisconsin, said state regulators have proposed letting insurance companies keep money that would go to customers as rebates.
"They are just obsessed with the idea that these insurance companies are somehow on fragile ground," he said.
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UNDER THE THRESHOLD
Six of 24 companies that sell insurance to individuals in Wisconsin spent less than 80% of premiums on medical claims last year.
- Humana Insurance Co., a unit of Humana Inc.
- Golden Rule Insurance Co., a unit of UnitedHealth Group Inc.
- Time Insurance Co., a unit of Assurant Health
- Mega Life & Health Insurance Co., a unit of HealthMarkets Inc.
- American Republic Insurance Co.
- World Insurance Co., a unit of American Republic Insurance Co.