State insurance commissioners agreed to a framework for regulations for medical loss ratios, an obscure statistic that will become noteworthy to consumers after next year because it might lead to rebates.
The new health care law established minimum medical loss rations for insurers, basically setting the percentage of premiums an insurer must spend on health care. Starting next year, the law calls for minimum ratios of 80 percent for individual and small group health insurance and 85 percent for large group coverage. If they don't meet those minimums, they may have to pay rebates to their customers.
The large group minimum is expected to be manageable for insurers, but the individual and small group figure could cause problems. Insurers have warned that a rigid limit would force many of them to leave certain markets, and the National Association of Insurance Commissioners are recommending that the Department of Health and Human Services phase in this requirement where necessary.
The goal behind these minimum ratios is to make sure a good portion of premium dollars spent by consumers goes toward care and not just to "enhance profits or pay large salaries," Kansas Insurance Commissioner Sandy Praeger said.
"This is placing on (insurers) some pretty stringent requirements," she said.
Insurance commissioners have spent months studying and discussing what should be counted in the medical loss ratio, or MLR, formula. They decided, for instance, that insurers can count things like health care hot lines as an expense toward meeting minimum MLRs, as long as they focus on care quality.
They also decided that agent commissions will be counted in the premium total used in the MLR calculation, despite strong lobbying from agents and brokers worried about whether that will lead to a reduction in commissions.
But the commissioners also will form a working group to discuss this issue some more with HHS.
HHS will use the association's recommendations to iron out the final provision. It said in a statement Thursday it will provide "clear guidance to stakeholders in the coming weeks."
"These recommendations are reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers," the statement said.
The National Association of Insurance and Financial Advisors said in a separate statement it was disappointed over the commission issue. It said it hoped regulators will recognize "agents need to be compensated for the vital assistance they provide consumers in managing day-to-day health care issues."
The trade association America's Health Insurance Plans predicted in a separate statement the provision will reduce competition and disrupt coverage, among other things.