(Updates with comment from governor’s office in seventh paragraph.)
Jan. 27 (Bloomberg) -- Health insurers in Texas can’t take more than 20 percent of the revenue they collect in premiums for overhead and profit after the U.S. today denied a request from the state for more generous limits.
Texas Republican Governor Rick Perry’s administration had asked the U.S. to let plans led by Blue Cross and Blue Shield of Texas spend less than 80 percent of their premium revenue on patient care. Rules created under the 2010 health-care law limit the administrative costs and profits for insurers selling to individuals and small businesses.
Thirty-four companies sell policies to individuals in Texas. Eight carriers who control 85 percent of the individual market have said they’ll continue selling after the profit limit is enforced, officials with the U.S. Health and Human Services Department said in denying the request.
There is a not a “reasonable likelihood” that the profit limit will destabilize Texas’s individual market, said Steve Larsen, director of the U.S. Center for Consumer Information and Insurance Oversight, in a letter today to the state insurance commissioner, Eleanor Kitzman.
Not Enough Time
Kitzman’s agency, the Texas Department of Insurance, said in a statement on its website that the decision doesn’t give insurers enough time to adjust their businesses. Carriers that spent less than 80 percent of premiums on care in 2011 must rebate the difference to their customers this year.
“A reasonable, responsible phased-in approach would still have afforded rebates to Texas consumers without risking disruption, dislocation and withdrawal of carriers in the individual market,” the department said.
Allison Castle, a spokeswoman for Perry, said the decision was “the Obama administration’s latest overreach.”
“These types of decisions are best left to the states,” she said.
Seventeen states have asked for adjustments, and HHS has denied nine of them. One state, Maine, got the higher profit ceiling it requested in 2012, and five states got a limit greater than 20 percent but less than they requested.
Two states, Wisconsin and North Carolina, have requests outstanding.
--With assistance from Darrell Preston in Dallas. Editors: Adriel Bettelheim, Andrew Pollack
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