From the Columbus Dispatch…
Insurers face cap on nonmedical spending
Monday, December 13, 2010
By Suzanne Hoholik
Starting next year, health insurers will have to spend at least 80 percent of the premiums they collect on medical costs or improving care.
The federal health-reform law created a "medical-loss ratio" that limits insurers to spending 20 percent of premiums on administrative costs, such as executive salaries and marketing.
Consumer groups say the requirement for spending on care should be between 80cents and 85 cents of every dollar.
"These new regulations are great news for individuals, families and small businesses that are concerned about skyrocketing insurance premiums," said Cathy Levine, executive director of the Universal Health Care Action Network of Ohio.
"Insurance companies may feel pressure to be more efficient, and if not, they will be paying rebates to consumers," Levine said.
Health insurers will have to report the medical-loss information.
"Instead of spending consumers' hard-earned dollars on executive salaries or advertising, health insurers will now be required to use those premium dollars on medical care for patients and efforts to improve that care," U.S. Sen. Sherrod Brown, D-Ohio, said in a statement.
Federal health officials say they expect that as many as 9 million people will be eligible for rebates of as much as $1.4 billion starting in 2012. Average rebates per person could total $164 for those with individual health policies.
Mary Jo Hudson, director of the Ohio Department of Insurance, said the medical-loss ratio is designed to prompt insurers to improve health-care quality and patient safety and increase the use of electronic medical records.
For example, if an insurer changes part of its physician network from the current fee-for-service model to a medical-home model in which patients have more one-on-one time with their doctor and their care is coordinated, these upfront costs could be included.
"Some of the strongest cost-saving measures for health-care reform are emphasized through the medical-loss ratio," Hudson said.
Kelly McGivern, president of the Ohio Association of Health Plans, said that although there are positives for consumers, there are problems, too.
She said costs associated with reducing health-care fraud should be included in what health insurers can spend premiums on.
McGivern said companies need more time to comply with the rules. She wants Ohio to join other states that have asked for the medical-loss ratio to be phased in by 2014.
"If an insurance company determines they can't meet the medical-loss ratio, they could decide to pull out of the marketplace, which would reduce choices for consumers," she said.