Calif. Commissioner Jones to Enforce Medical Loss Ratio Rule

By | January 5, 2011

Almost immediately after being sworn into office on Tuesday, California Insurance Commissioner Dave Jones signed an emergency order to enforce the medical loss ratio. the MLR rules require insurers to annually disclose the percentage of premium revenue spent on reimbursement for clinical services and activities that improve health care quality and to provide rebates when the spending on “non-claims costs” — such as executive salaries, advertising and administrative costs — exceed 15 percent of premium revenue in the large group market or 20 percent in the small group and individual markets.

Jones said he was signing the emergency order to enforce the MLR in California and to be a leader in the nation — even if Congress prevents the federal government from enforcing the law or repeals health care reform.

The MLR rule is controversial in the insurance industry, because insurance agent commissions are not excluded from the calculation. The Independent Insurance Agents & Brokers of America (Big “I”) has argued that these agent commissions are passed 100 percent to third parties and are therefore pass-through payments that should not be included in the formula.

The regulations need to be approved by the state Office of Administrative Law.

Jones also said he plans to implement create a Deputy Commissioner position for Health Care Policy and Reform. “We should adopt the same approach for health insurance and managed care premiums as we do for auto, property and casualty insurance,” he said, noting in those lines of insurance the Commissioner has the authority to reject excessive premium increases. “Most Californians are surprised when they hear that the Commissioner has no authority to reject excessive premiums on health insurance,” he said.

Jones said his third priority will be to protect consumers and create a level playing field between consumers and insurance companies, and to ensure California has a vital and competitive market in which insurers want to do business and consumers have choices in the marketplace.

Jones said he also would be directing his department to develop regulations and initiate the rulemaking process on annuity suitability regulations so seniors in particular are not taken advantage of.

And, Commissioner Jones said he plans to re-establish the Communications Program Branch of the Department of Insurance to provide consumer education and help administer the state’s low-cost auto insurance program and COIN program, which encourages insurers to invest in underserved communities.

Jones said his tenure in office will be defined as one of “action,” and that under his leadership, the DOI will be “proactive.” “We will improve what needs improving, and enhance what needs enhancing,” he said.

Topics California Legislation Profit Loss

Was this article valuable?

Here are more articles you may enjoy.