Affordable Care Act’s Medical Loss Ratios
Rules Released

 

On November 22, 2010 Health and Human Services (HHS) Secretary Kathleen Sebelius announced rules that define how the “medical loss ratios” in the Affordable Care Act will work to lower insurance premiums. These rules require insurance companies to spend 80 or 85 cents of every premium dollar they collect on medical care and medical care improvements (80 percent in the individual and small group plans; 85 percent for the large group plans).

These new rules fill a hole in consumer protections. The rules make sure that, in every state, the lion’s share of consumers’ premiums will be used for quality medical services rather than be pocketed by insurance companies for CEO salaries, advertising, administrative costs, and profits.

The new required premium-to-medical care ratio rules were drafted by the National Association of Insurance Commissioners (NAIC) through a long, careful process that was transparent and allowed consumers and all interested stakeholders a place at the table and an opportunity to voice their concerns. Today’s regulation adopts the recommendations submitted to HHS by NAIC and represents a fair balance of interests.

The medical loss ratio regulation outlines insurer reporting requirements, how insurance companies will calculate their medical loss ratios (including what counts as an activity that improves health care quality), timing of reports and rebates, as well as accommodations to guard against market destabilization.

More information about medical loss ratios: http://www.healthcare.gov/news/factsheets/medical_loss_ratio.html .

The regulation and other technical information:http://www.hhs.gov/ociio/regulations/index.html .

Thanks to the Affordable Care Act, we can celebrate another very important milestone for consumer protection and insurance company accountability -- one that gives consumers more power to demand real value and health security when they buy insurance coverage.

-From “New HHS Rules Fill a Hole in Consumer Protections”, Jessica Larochelle, Families USA, November 22, 2010.

 

11/10