CNBC/Associated Press

PORTLAND, Maine - The federal government Tuesday granted Maine a waiver of a key provision in President Barack Obama's health care overhaul, citing the likelihood that enforcement could destabilize the state's market for individual health insurance.

The U.S. Health and Human Services department said in a letter it would waive the requirement that insurers spend 80 cents to 85 cents of every premium dollar on medical care and quality improvement. Instead, the letter said, the state could maintain its 65 percent standard for three years, with the caveat that HHS intends to review the figures after two years.

The decision makes Maine the first state to receive a waiver of the requirement. Similar requests are pending from Kentucky, Nevada and New Hampshire.

In seeking the waiver, Maine Insurance Superintendent Mila Kofman feared that one of three major insurers offering individual plans in Maine would withdraw from the market altogether if the federal requirement remained in place. The insurer, MEGA Life and Health Insurance Co., has 37 percent of the state's individual market.

MEGA's departure from the market would carry the "reasonable likelihood of destabilizing the Maine individual market," with costly ramifications for MEGA's policy holders, wrote Steven Larsen, an HHS deputy administrator.

"We appreciate the evidence-based approach HHS took with our request and in working with us," Kofman said in a statement.

Maine's individual insurance market has been volatile, with big premium increases attributed in part to the small number of enrollees and lack of competition. There have been fears the market could collapse altogether.

As of last September, Anthem Blue Cross Blue Shield had the biggest market share with 18,297 individual policies, followed by MEGA Life and Health's 13,732 and Harvard Pilgrim Health Care's 4,935. Harvard Pilgrim provides coverage through DirigoChoice, the state-subsidized health insurance program.

An official from MEGA Life and Health didn't immediately return a call from The Associated Press.

The Affordable Care Act allows states to petition to delay the federal standard until 2014 on how much money from premiums must go to medical care for the individual market. Administrative costs tend to be higher on those plans than on insurance plans provided through employers.

The federal law envisions that by 2014 there will be health insurance exchanges to provide individuals with new, affordable options for health care options.

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