HHS details health law MLR requirement: insurers must spend at least 80 percent on medical care

The Obama administration released regulations this morning detailing a health law requirement.  

The medical loss ratio, also know as MLR, rule "requires insurance companies to spend at least 80 cents of the premium dollar on medical care and quality. For employer plans covering more than 50 people, the requirement is 85 cents," according to The Associated Press, which adds: "Part of the new health care law, the rule is meant to give consumers a better deal. Administration officials said it will prevent insurers from wasting valuable premiums on overhead, marketing and executive bonuses. 'These new rules are an important step to hold insurance companies accountable and increase value for consumers,' said Health and Human Services Secretary Kathleen Sebelius" (11/22).

National Journal: "The regulations followed the National Association of Insurance Commissioners recommendations on deducting federal and state taxes from the medical loss ratio. It also allows 'mini-med' plans to follow a different calculation formula than other plans in 2011" (McCarthy, 11/22).

Bloomberg : "U.S. health insurers can include the cost of federal taxes in determining whether they spend enough on patient care, increasing the amount they can keep for administration or profits under new federal rules. ... Health plans led by Indianapolis-based WellPoint Inc. may seek delays if individual states can show the federal government that the so-called medical-ratio rules will destabilize insurance markets" (Armstrong and Nussbaum, 11/22).

HHS issued a news release on the new regulations.

For more background information, see Health Affairs' issue brief on the topic. It examines the current debate over how to enforce the medical loss ratio requirements outlined in the Affordable Care Act (Haberkorn, 11/17).

American Medical News: "Health insurers are reporting stronger earnings, in large part because fewer of their members appear to be going to their doctors. Insurers and analysts give varying reasons why plans are spending less on care than expected -- the overall economy, higher-deductible plans, better cost management by insurers, a flu season that wasn't as bad as anticipated. But insurers agree that there is no reason to reduce their premium increases or increase spending on care, including bumping up physician pay, even as they face minimum medical-loss ratios in 2011 mandated by the health system reform law" (Berry, 11/22).