Healthcare Business News

HHS seeks input on insurer-spending rules

By Rebecca Vesely
Posted: April 12, 2010 - 4:45 pm ET

HHS Secretary Kathleen Sebelius is calling on state insurance commissioners, health plans and the public to help draw up rules on insurer spending for medical care.

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The new healthcare reform law requires health plans to spend between 80% and 85% of premium dollars on clinical services and quality, or provide a rebate to members for the difference. Health plans must begin reporting these spending figures—called a medical loss ratio—this year. The consumer rebates start in January 2011. The goal of this rule is to prohibit insurers from overspending on administration, including salaries, overhead and marketing.

In a letter ‪to the National Association of Insurance Commissioners, Sebelius is asking for assistance in defining a medical loss ratio. The HHS is asking for the group’s guidance by June 1, instead of by the end of the year, as outlined in the health reform law.

“The first step is to learn what works today,” said Jeanne Lambrew, director of the HHS Office of Health Reform, on a call with reporters. Lambrew added that state insurance commissioners have expertise in calculating medical loss ratios and their enforcement.

The agency is also seeking public comment over the next 30 days on medical loss ratio rules. Among the outstanding questions are the criteria for reasonable premium rate increases, Lambrew said.

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