WASHINGTON, D.C. – The U.S. Department of Health and Human Services (HHS) today unveiled new requirements for how much health insurers must spend on medical care in comparison to non-medical items, such as advertising and overhead, under the new health reform law.
Starting January 1, all health insurance plans will be required to spend a set percentage of their premium income on medical claims and quality improvement expenses. That percentage will be 80 percent for individual and small group plans, and 85 percent for larger groups. This split is known as the “medical loss ratio.”
Lynn Quincy is a Senior Health Policy Analyst for Consumers Union, the nonprofit publisher of Consumer Reports magazine. She serves as a consumer representative to the National Association of Insurance Commissioners, the group that created these standards.
Quincy said, “The term ‘medical loss ratio’ isn’t exactly consumer-friendly, but these new rules are very good for consumers. People are going to get better value for their premium dollars.
“The new rules seek to keep a lid on the non-medical expenses that are typically included in the insurance premiums we pay — things like executive pay, lobbying, and marketing.
“If a health plan spends too much on these non-medical items – relative to their spending on medical care – the plan has to reimburse its customers by paying them rebates.
“Looking at industry filings, many health insurers should not have trouble complying with these new standards. But for those insurers with excessive spending on non-medical items, the standards will provide a strong incentive to rein in those expenses.
“Plus, consumers will benefit from greater transparency in premium calculations. There will be new requirements that govern how insurers report their spending. These reports must be made public by HHS on its website. So in the future, it may not take a congressional investigation to see how much of your premium dollar is being spent on medical care.
“The goal of these requirements is not to generate rebates, but to drive insurers to spend less money on bureaucracy and more on healthcare. Consumers will benefit when their insurance choices include more insurers that are more efficient,” Quincy said.
Contact:
David Butler, 202-462-6262