Starting this year, health insurance companies who fail to appropriately meet their medical loss ratio will have to give their customers a rebate. Texas is one of sixteen states that wants to delay having to actually pay out on rebates. The state has asked the federal government for permission to delay the rebate plan.
The medical loss ratio is one of the health reform laws that comes from the Affordable Care Act. It was designed to protect consumers. Previous to this law, some health insurance companies were taking the money that they got from premiums, and spending the majority of it on things that didn’t actually improve the health of the customers.
Now, the medical loss ratio has taken effect. Health insurance companies must spend at least 80% of the money that the get from premiums on medical care, and things that really do improve the health of their customers. The other 20% is the portion that insurers can spend on things like salaries of their employees, administrative costs, broker fees, rent, profit, and other stuff that doesn’t improve the health of customers.
Beginning this year, health insurance companies who fail to spend at least 80% on things that help improve the health of their customers will face a penalty. Those insurers will have to give a rebate to their customers, that matches the amount that they failed to spend on actual health care.
The Texas Department of Insurance has asked the federal government for permission to delay having health insurance companies to pay out rebates. Instead of starting now, Texas wants health insurance companies to have three years to gradually work up to the required 80 / 20 ratio. The reasoning for this seems to be because there is fear that smaller insurance companies will leave Texas, or will go out of business, if they have to start paying rebates right now.
America’s Health Insurance Plans is a lobbying group for insurance companies. Their spokesman, Robert Zirkelbach, has said that the medical loss ratio is trying to make insurers responsible for rising premiums. He feels that the problem is the fault of doctors, hospitals, and pharmaceutical companies.
In addition to Texas, sixteen other states have asked the federal government for permission to delay having health insurers who fail to meet the medical loss ratio begin paying rebates to their customers. Those states are: Maine, New Hampshire, Nevada, Kentucky, Florida, Georgia, North Dakota, Iowa, Louisiana, Kansas, Delaware, Indiana, Michigan, Texas, Oklahoma, North Carolina, and Wisconsin. Six of these states were granted permission to delay, and eight were turned down.
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