Regulation: Health Insurers Must Put More Premiums into Medical Care

The California Office of Administrative Law approved Insurance Commissioner Dave Jones’ request to make permanent an emergency regulation he issued last year that requires health insurers to put a larger share of premiums into medical care.

The regulation requires health insurers to put at least 80 percent of premiums collected from individual policyholders into medical care, a key component and requirement of the federal Affordable Care Act.

“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,” Jones said in a statement.

The regulation is also stronger than the federal law, according to Jones. Under the regulation, Jones applies the 80 percent standard at the time a rate is filed with the Department of Insurance rather than after the consumer has paid the entire year’s premium. The federal government is not applying the medical loss ratio at the time the rate is implemented.

Under federal law, a consumer who pays a premium in excess of the federal medical loss ratio requirement waits until the following year for a refund. Under California’s regulation, Jones can evaluate whether the required percentage of premium goes into medical care at the start, instead of waiting until the end of the year to see if health insurers are dedicating the required percentage of premium to medical care.

“As health insurance rates continue to climb and as I continue to lack the legal authority to reject excessive rate hikes, at a minimum Californians should know that at least 80 percent of their premium dollars is going to pay for health care as the law requires,” Jones said.

Topics Carriers Legislation