Calif. OKs Rule Making Insurers Spend More of Premiums on Care
The state Office of Administrative Law has made permanent an emergency regulation issued by Insurance Commissioner Dave Jones' (D) last year that requires health insurers to put at least 80% of premiums collected from individual policyholders toward the cost of medical care, Insurance Journal reports (Insurance Journal, 2/9).
Under the medical-loss ratio rule included in the federal health reform law, private insurers are required to spend at least 80% in the individual market or 85% in the group market of their premium dollars on direct medical costs (California Healthline, 11/23/11). Â
Insurers that do not comply with the ratio will have to issue rebates to consumers the following year (Insurance Journal, 2/9).
The reform law allows states to request adjustments if they can prove that enacting the new limits would immediately destabilize the state's insurance market (California Healthline, 11/23/11).
Details of the Emergency Regulation
Jones' regulation differs from the federal provision. It applies the 80% standard immediately after a rate is filed with the Department of Insurance instead of after policyholders pay the entire year's premium (Insurance Journal, 2/9).
Jones said in a statement, "Ensuring that more of consumers' premium dollars go into actual medical care -- and not into insurance industry profits and administrative costs -- is one of the most important components of federal health care reform" (CDI release, 2/9).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.