It’s official! The rules about what insurance companies can, and cannot, include as part of the “medical loss ratio” have been decided. Government regulators worked together with the National Association of Insurance Commissioners to come up with what is allowed, and what is forbidden. How does this affect consumers like you?
People who have health insurance must pay premiums. Often, these premiums are paid monthly. New regulations that begin in 2011 require insurance companies to pay between 80% and 85% of the money they get from their customers on medical claims, or on activities that will improve the health of their customers. In the past, not all insurance companies were spending that percentage of their income on things designed to benefit their customers.
After this was decided, there was much debate about what an insurance company could, and could not, include as “medical claims or helpful to the health of their customers”. Some insurance companies wanted to include their employee’s salaries in the medical loss ratio. There were many questions about what kinds of taxes the insurance companies would be able to put into the medical loss ratio. Many insurance companies felt that the money they spent on identifying cases of fraud, and fraud prevention, should be something that counted as “helpful to the consumer’s health”.
Since none of those items are actually medical costs, or things that would help to keep a person from becoming sick, the federal government could argue that no, those things cannot be included in the medical loss ratio. So, we have two sides. The insurance companies want to make as much profit as possible, so they want to push all kinds of administrative things into the medical loss ratio. Customers will want to have as much of their premiums as possible going towards the cost of medical care, and towards preventative medicine, so as to get the best value for the premiums they are paying.
The official decision about what can be included in the medical loss ration includes spending that increases patient safety, investment in some kinds of health information technology, and the cost of preventing medical errors, and re-admissions to hospitals. What are insurance companies not allowed to push into the medical loss ratio? Nurse hotlines that don’t directly deal with the care of patients are not to be included. The amount of money the insurance company chooses to spend on fraud prevention is not to be included either. Broker’s commissions are also not to be included in the medical loss ratio.
There is some fear that people who are working as insurance brokers will see their commissions cut, and that this could cause the brokers to leave the market. Another rule involves insurance companies who work in more than one state. The medical loss ratio must be met in each state that they work in separately. They are not allowed to lump together the spending across state lines. Overall, the decisions benefit consumers much more than they benefit the insurance companies.
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