Federal authorities have denied Texas a waiver from a new law that restricts how much health insurance providers can spend on expenditures. This legislation is part of the Affordability Care Act, a controversial stipulate of the Federal Healthcare Reform Act signed in 2010. It requires health insurance carriers to spend approximately 80 percent of their earnings on healthcare and improvement services. Those who spend over 20 percent of their income on other expenses such as executive salaries will have to offer rebates to their clients from the start this year.

The Texas Department of insurance has requested for a federal waiver on the law in July last year. They termed the law as unconstitutional and requested for additional time to gradually adjust the state’s health insurance system. However, officials at the Department of Health and Human Services rejected the application on the grounds that there is little evidence to prove that the new laws will destabilize insurers in the lone star state. Consequently, health insurance carriers in the state will have to fork out roughly $476 million in rebates to clients over the next three years. Thus, consumers will receive full benefits from the Affordable Health Act just like in other states.

In his application for a federal waiver, Texas insurance commissioner Mike Geeslin had expressed concern that the new law would stifle competition among carriers if enforced. He also argued that the law would force insurers to significantly change their normal operations, leading to price and coverage troubles. This would curtail health insurance delivery and possibly force some players from the market. Soon after its rejection, the commissioner expressed dissatisfaction with DHHS decision, claiming that a reasonable, responsible approach to the new system would still have benefited customers in the long run.

Seventeen states had applied for waivers from the new law stating various reasons. So far, federal authorities have rejected nine requests, granted six while two await their decision. Four states whose requests were granted have republican governors. Rejected applications include one with a democratic governor, while Florida and Texas, the latest casualties both having republican representatives firmly opposed to Obama’s Healthcare Reform Act.