Medical Loss Ratios and Why They Are Important to You

From the Healthcare.gov. website:

What Is a Medical Loss Ratio and Why Does it Matter? 

Posted October 21, 2010 

"Every year, American consumers and employers spend billions of dollars to purchase health insurance to help them gain access to the health care that they need and the cost of coverage has doubled over the last 10 years.

The Affordable Care Act:

The law was enacted in two parts: The Patient Protection and Affordable Care Act was signed into law on March 23, 2010 and was amended by the Health Care and Education Reconciliation Act on March 30, 2010. The name “Affordable Care Act” is used to refer to the final, amended version of the law. 

Consumers can soon rest assured that the bulk of their premium dollars are going primarily to pay for care, not for overhead, marketing, advertising, and big salaries and bonuses.

How will this happen?  Through an important provision of the law requiring insurance companies to meet new requirements concerning their “medical loss ratios.”

Like many health insurance terms, “medical loss ratios” sounds confusing, but all it refers to is the percentage of your premium dollars that an insurance company spends on providing you with health care and improving the quality of your care, versus how much is spent on administrative and overhead costs and, in many cases, high salaries or bonuses.

To be sure your premium dollars are spent primarily on health care itself, the law requires that 80-to-85% of the money collected by insurance companies be spent on health care services and health care quality improvement.

In other words, for many of you, this part of the law---the medical loss ratio limits---will mean that more of your money that you pay out each month for premiums will be going to your actual health care, and to improving the quality of that health care.

To give insurance companies time to adjust, these requirements will kick in next year.  And if insurance companies do not meet these goals because their administrative costs or profits are too high, they must provide rebates to you, the consumers.

This is part of the larger goals of the Affordable Care Act: making insurance more affordable and more transparent; holding insurance companies accountable, and increasing the quality of your care.

Today, the National Association of Insurance Commissioners (NAIC), with representatives from every state and the District of Columbia, approved a set of recommendations on how to calculate an insurance company’s medical loss ratio.  This was the product of months of hard work, public hearings, and consultation with consumers, employers, insurers, and others. The NAIC has a long history of helping develop these types of rules through a transparent process so everyone is at the table.

The NAIC recommendations work to ensure that consumers get better value for their health care dollar, while recognizing that this is a big step for the insurance industry.  Now, the Department of Health and Human Services (HHS) will use the NAIC recommendations as a basis for writing the official rules."

We welcome your thoughts or comments.

The New Healtcare Laws Explained from The Kaiser Foundation

Take a look at the link that we have included here to the Kaiser Foundation that will show you a brief video explaining the new healthcare laws in a basic and simple way.  We like it because it helps to get the information to you quickly and easily.  We hope you find it helpful.  The link is: http://healthreform.kff.org/The-Animation.aspx

Small Business Tax Credits Available for Health Care

From the IRS website, IRS.gov, regarding the Small Business Health Care Tax Credit:

“Millions of small employers received postcards from the IRS beginning in April that alerted them to the new Small Business Health Care Tax Credit and encouraged them to check their eligibility. Even if you didn't receive a postcard, your business still may be eligible.  Read more about this effort. 

Eligibility Rules

• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000 per employee.
• Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit

• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers. 

Three Simple Steps for Employers to Qualify:

To determine if your small business or tax exempt organization qualifies for the Small Business Health Care Tax Credit, follow the three simple steps on the fact sheet. 

To view the IRS fact sheet, go to: http://www.irs.gov/pub/irsutl/3_simple_steps.pdf. 

To see a short video that explains this program, go to: http://www.youtube.com/watch?v=85i1kzIG57k.”

New Health Policies in effect as of September 23, 2010

From the Healthcare.gov website:

"September 23, 2010 represented a new day for American consumers in our health care system. This is the day that a series of new rights, benefits, and protections under the Affordable Care Act will begin to put consumers, not insurance companies, in charge of their health care. Below is a brief summary of the new restrictions for insurance companies and new rights for consumers beginning to take effect":

Insurers Can No Longer:

·        Deny coverage to kids with pre-existing conditions. Health plans cannot limit or deny benefits or deny coverage for a child younger than age 19 simply because the child has a pre-existing condition like asthma.

·        Put lifetime limits on benefits. Health plans can no longer put a lifetime dollar limit on the benefits of people with costly conditions like cancer

·        Cancel your policy without proving fraud. Health plans can’t retroactively cancel insurance coverage – often at the time you need it most - solely because you or your employer made an honest mistake on your insurance application.

·        Deny claims without a chance for appeal. In new health plans, you now have the right to demand that your health plan reconsider a decision to deny payment for a test or treatment. That also includes an external appeal to an independent reviewer.

Consumers in New Health Plans Will Be Able to:

·        Receive cost-free preventive services. New health plans must give you access to recommended preventive services such as screenings, vaccinations and counseling without any out-of-pocket costs to you.

·        Keep young adults on a parent’s plan until age 26. If your health plan covers children, you can now most likely add or keep your children on your health insurance policy until they turn 26 years old if they don’t have coverage on the job.

·        Choose a primary care doctor, ob/gyn and pediatrician. New health plans must let you choose the primary care doctor or pediatrician you want from your health plan’s provider network and let you see an OB-GYN doctor without needing a referral from another doctor.

·        Use the nearest emergency room without penalty. New health plans can’t require you to get prior approval before seeking emergency room services from a provider or hospital outside your plan’s network – and they can’t require higher copayments or co-insurance for out-of-network emergency room services.

·        See a timeline of all major provisions of the Affordable Care Act at www.healthcare.gov."