New regulations issued today by the Department of Health and Human Services (HHS) require health insurers to spend 80 to 85 percent of consumers’ premiums on direct care for patients and efforts to improve care quality. This regulation, known as the “medical loss ratio” provision of the Affordable Care Act, will make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money.
“Thanks to the Affordable Care Act, millions of Americans will get better value for their health insurance premium dollar,” said HHS Secretary Kathleen Sebelius. “These new rules are an important step to hold insurance companies accountable and increase value for consumers.”
Today, many insurance companies spend a substantial portion of consumers’ premium dollars on administrative costs and profits, including executive salaries, overhead, and marketing. The medical loss ratio is the % of dollars spent on direct care vs. those administrative costs and profits.
Today's regulation announcement provides excellent news for Americans, because consumers will receive more value for their premium dollar because insurance companies will be required to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement, rather than on administrative costs and profits, starting in 2011. If they don’t, the insurance companies will be required to provide a rebate to their customers starting in 2012.
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