Making Sure Your Premium Money is Spent on YOU: Explaining Medical Loss Ratios
October 27 2010
Last week, Katherine Sebelius and Richard Sorian set out to explain a part of the Affordable Care Act that might sound confusing to some people: medical loss ratios.
In reality though, it's a simple idea. The "medical loss ratio" is just the offical language for the new policy kicking in next year that demands health care providers spend more of your premium payments on actual patient care, as opposed to administrative or other assorted costs.
Over the past years, a shockingly increasing percentage of premium payments has gone to administrative and overhead costs and, in many cases, high salaries or bonuses. Fortunately for American consumers, that's about to change.
Richard Sorian, Assistant Secretary for Public Affairs, explained in detail last week on HealthCare.gov:
To be sure your premium dollars are spent primarily on health care itself, the law requires that 80-to-85% of the money collected by insurance companies be spent on health care services and health care quality improvement.
In other words, for many of you, this part of the law---the medical loss ratio limits---will mean that more of your money that you pay out each month for premiums will be going to your actual health care, and to improving the quality of that health care.
To give insurance companies time to adjust, these requirements will kick in next year. And if insurance companies do not meet these goals because their administrative costs or profits are too high, they must provide rebates to you, the consumers.
This is part of the larger goals of the Affordable Care Act: making insurance more affordable and more transparent; holding insurance companies accountable, and increasing the quality of your care.
The Medical Loss Ratio policy was in the spotlight last week when after an exhaustive review, the National Association of Insurance Commissioners (NAIC) released its recommendations on how to actually calculate the medical loss ratio of insurance companies.
In a statement, HHS's Katherine Sebelius thanked NAIC for their contributions, and laid out the next steps for consumers:
These recommendations are reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers. Not only do they ensure consumers receive better value for their health care dollar, they recognize special circumstances in different markets to preserve market stability and employee coverage as we transition to the new marketplace in 2014.
The next step is for the Department of Health and Human Services to issue a medical loss ratio regulation that will provide clear guidance to stakeholders in the coming weeks.
We will work quickly to promulgate this regulation, using the NAIC recommendations as a basis, because we believe these new policies will help ensure not only cost savings but higher quality care for consumers. We look forward to working closely with NAIC throughout the process.
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"Under new plans, no child under age 19 will be denied coverage for a pre-existing conditions, period. Adults who have been without insurance for six months and who have been unable to obtain insurance because of a pre-existing condition, can apply for coverage under the Pre-Existing Condition Insurance Plan (PCIP)."
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Insurers can no longer cut someone after the fact.
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New screening procedures are now in place for health care providers to eliminate fraud and waste in the health care system.
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Medicare Part D enrollees who hit the Medicare prescription drug benefit gap in 2010 will automatically receive a $250 rebate check.
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Effective immediately, qualified small employers get tax credits of up to 35% of premiums for offering coverage.
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America's new health care law makes it easier for you to find the quality, affordable health care that you and your family need.
