The Obama administration took an important step toward implementing insurance rate regulation on Monday, April 12. The U.S. Department of Health and Human Services (HHS) is requesting information that will help it effectively regulate medical loss ratios and health premium increases under the new reform legislation. Medical loss ratio refers to the proportion of premium revenues spent on clinical services and quality improvement, as opposed to profits, bonuses, and other overhead expenses.
The new legislation creates several requirements to help ensure that insurance companies do not charge rates that are excessive relative to the benefits provided, which the government hopes will keep rates affordable. For example, health insurers must submit data on their medical loss ratio, the National Association of Insurance Commissioners (NAIC) will establish uniform definitions and standardized methodolgies for determining this medical loss ratio, and state regulators will have the authority to monitor premium increases.
HHS Secretary Kathleen Sebelius wrote a letter seeking the NAIC's help on these issues, as well as requesting its input on establishing a rate review process. NAIC members are the elected or appointed state government officials who, along with their departments and staff, regulate the conduct of insurance companies and agents in their respective state or territory.
HHS also issued two requests for public comment on the implementation of the medical loss ratio requirement and the rate review process to monitor rate increases and prevent unreasonable premiums.
For updates on action taken by HHS to implement health reform, visit HealthReform.gov.
