Following months of debate, insurance commissioners recommended strict new federal rules in October for calculating how much health insurance companies must spend on patient care.
The National Association of Insurance Commissioners (NAIC) sent its model for calculating "medical loss ratios" to the U.S. Department of Health and Human Services for final approval.
Health care reform law requires insurance companies to spend at least 80 percent of premiums on patient care starting next year or issue rebates to consumers. State insurance commissioners were charged with developing rules for calculating the ratio, including what types of costs could be counted as health care, versus administration.
Consumer advocates praised the proposed rules, while health insurance companies warned they will threaten coverage.
"The current MLR proposal will reduce competition, disrupt coverage and threaten patients' access to health plans' quality improvement services," America's Health Insurance Plans President and CEO Karen Ignagni said in a press statement.
Consumer Watchdog applauded NAIC for resisting industry pressure to weaken the spending requirement and said on its Web site that the new rules will require insurers to spend more on health care and put less toward administration and profits. Consumer Watchdog wants the Obama administration to forbid premium hikes until insurance companies comply with the pricing requirements.