HHS Issues Rules Requiring 80% Of Premiums Be Spent on Health Care

The Department of Health and Human services has released new rules requiring health insurance companies to spend 80 to 85 percent of premium dollars on medical care as opposed to administrative costs. Companies which exceed these numbers will have to start issuing rebates to beneficiaries beginning in 2010. The National Journal reports:

The Department of Health and Human Services today released long-awaited regulations governing how insurance companies can spend customer premiums.

The interim final rule on medical-loss ratio requires insurers to spend 80 percent to 85 of premium dollars on medical care, as opposed to administrative costs.

The regulations follow the National Association of Insurance Commissioners recommendations on deducting federal and state taxes from the medical loss ratio. It also allows “mini-med” plans to follow a different calculation formula than other plans in 2011.

“These new rules are an important step to hold insurance companies accountable and increase value for consumers,” HHS Secretary Kathleen Sebelius told reporters at a press conference this morning.

The new health care law requires insurers offering individual or group coverage to submit annual reports to HHS on the percentages of premiums that the coverage spends on reimbursement for clinical and quality improvement services.

If the spending does not meet minimum standards for a given plan year, then the companies have to pay a refund to policy holders beginning in 2012.

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4 Comments

  1. 1
    Mikaela Skye says:

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  2. 2
    Dominic D'Adamo says:

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  3. 3
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  4. 4
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