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California approves emergency rule for health insurance medical loss ratio
By Insure.com staff

Granting a request by California Insurance Commissioner Dave Jones, the state's Office of Administrative Law approved an emergency regulation giving him power to enforce the 80 percent medical loss ratio in the individual health insurance market.

Under federal health care reform, insurers must spend at least 80 percent of premiums for individual health insurance on medical care and health care quality improvement. Group health plans must spend at least 85 percent of premiums on health care and quality improvement.

Jones asked the Office of Administration Law for the emergency regulation on his first day in office to ensure that his department could enforce the rule even if Congress interferes with the federal Department of Health and Human Services' power to enforce it.

"I will be watching very closely to make sure health insurers comply," Jones said in a press statement.

The medical loss ratio provision was crafted to reduce health insurance premiums by limiting how much insurers can spend on administration, such as marketing and executive salaries, and how much may be collected in profit.

In 2010, more than 20 percent of individual health insurance consumers were in plans that spent more than 30 cents of every premium dollar on administrative costs, and another 25 percent of consumers were in plans that spent between 25 and 30 cents of every premium dollar on administrative costs, according to the U.S. Department of Health and Human Services. In the most extreme cases, some plans spent more than 50 percent of premiums on administration.

 

 

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