A key consumer benefit of President Obama’s health care reform law is the Medical Loss Ratio — a requirement that insurers spend 80 to 85 percent of premium dollars on health care, rather than administrative spending, and reimburse their customers if they fail to meet that standard. In June, Texas, under Gov. Rick Perry (R), requested a gradual adjustment of the MLR standard to 71 percent, 74 percent, and 77 percent for 2011, 2012, and 2013, arguing that immediate compliance would “likely to stifle competition in the market and constrain many Texans’ access to coverage.”
But 15 Democratic state lawmakers are questioning the need for the delay, since “12 of 35 individual insurance providers in Texas meet the 80/20 medical loss ratio” and a waiver would cost policy holders millions in rebates:
[Texas Department of Insurance] TDI estimates that Texans would receive $160 million in rebates or premium credit from individual insurance carriers in Texas in 2011 if providers are required to direct 80 percent of premiums to medical care and quality improvements. But if the adjustment is approved, and individual insurance carrier are only required to meet a 71/29 medical loss ratio in 2011, Texans would only receive $35.6 million in rebates.
A recent report from the Government Accountability Office (GAO) has also found that insurers are successfully meeting the MLR requirements by “reducing premiums in 2012,” not applying “for premium increases and are making adjustments to lower premiums as a strategy to increase their MLRs.” Most of the insurers are also reducing brokers’ commissions in an effort to lower administrative spending and meet the MLR benchmarks.