Health Insurance Regulators Miss Deadline for Setting Standard Medical Loss Ratios

In the Patient Protection and Affordable Care Act, state insurance regulators had until
December to standardize medical loss ratios. But that deadline was changed to
June 1 when Department of Health and Human Services secretary Kathleen Sebelius
realized that health insurance companies could use more time to implement the
changes than the December deadline would provide.

However, that deadline has come and gone and
insurance regulators feel they need more time to make decisions about medical
loss ratios according to The Washington Post.

Under the health insurance legislation, health
insurance companies will have to spend at least 80 to 85 percent of premiums to
pay for medical claims and improving health care. This leaves health insurers
15 to 20 percent to spend on administrative costs. The state insurance
regulators were supposed to provide guidelines for what should be counted as
medical care or administrative costs.

This provision is to keep health care costs low for
consumers. But if the definition of medical loss ratios is too narrow, health
insurance companies may cut back some of their great programs for
consumers, like nurse hotlines.

The National Association of Insurance Commissioners
said, “The medical loss ratio and rebate program… have the potential
to destabilize the marketplace and significantly limit consumer choices if the
definitions and calculations are too restrictive. Equally, the medical loss
ratio and rebate program could be rendered useless if the definitions and
calculations are too broad.”

The defining of the medical loss ratio could change
the way health insurance companies do business or it could have very minimal
impact. Either way, the medical loss ratios need to be just right to be
effective.

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