MANAGED CARE December 2010. ©MediMedia USA
Insurers must spend at least 80 to 85 percent of premiums on direct care for patients, as well as on efforts to improve quality of care, according to new regulations from the Department of Health and Human Services (HHS). The regulation, the medical loss ratio (MLR) provision of the Patient Protection and Affordable Care Act, outlines disclosure and reporting requirements, how insurers will calculate their MLR and provide rebates, and how adjustments could be made to the MLR standard to guard against market destabilization.
A substantial portion of premiums is spent on administrative costs, executive salaries, overhead, and marketing, says HHS. If insurers fail to reach the 80 percent requirement, they will have to provide a rebate to their customers starting in 2012.
Insurers in the individual and small group markets will be required to spend at least 80 percent of what they collect on medical care; large group plans must spend at least 85 percent.
Karen Ignagni, CEO and president of America’s Health Insurance Plans, says, “HHS’s regulations track closely with the recommendations state insurance commissioners offered after a substantive, collaborative process.”