AUSTIN (AP) – The federal government on Friday rejected a request by Texas to be excluded from a new law that would limit how much health insurance companies can spend on overhead.
The law is part of the Affordability Care Act, changes made in federal health care law in 2010 that Texas officials say is unconstitutional. It requires health insurers to spend at least 80 percent of their revenue on providing health care or health improvement programs.
Federal officials said as a result of Friday’s decision health insurers in Texas will provide $476 million in rebates over the next three years.
State insurance officials did not immediately respond to requests for comment on the decision.
In July the Texas Department of Insurance asked permission to allow Texas companies to lower the requirement to 71 percent in 2011, 74 percent in 2012 and 77 percent in 2013.
Mike Geeslin, the Texas insurance commissioner at the time, wrote to the U.S. Department of Health and Human Services saying that the rule would stifle competition in the state if enforced and possibly curtail access to health insurance.
The department’s analysis indicates “that the majority of carriers, regardless of size, could be forced to make irrational changes in their operations, creating pricing and availability disruptions,” Geeslin wrote. “It is also likely that a number of carriers would exit the market, choosing instead to focus on select products and states.”
But the department said in a letter Friday that Texas did not make its case. Health insurers who spend more than 20 percent on overhead and executive salaries will be required to give rebates to customers starting this year.
Seventeen states 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 HHS 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.
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