Healthcare Business News

Calif. official vows to enforce spending mandate

By Rebecca Vesely
Posted: January 25, 2011 - 2:15 pm ET

California Insurance Commissioner Dave Jones announced he now has the authority to enforce how health plan premium dollars are spent by insurance companies.

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The federal health reform law mandated that, starting Jan. 1, insurers must spend at least 80% of every member premium dollar for the individual market on medical care or quality-improvement activities. That means insurers can spend only up to 20% of member premiums on marketing, overhead or other administrative costs. Starting next year, insurers out of compliance must issue rebates to members.

Jones requested an emergency regulation to enforce this provision, and the Office of Administration Law has granted that request.

“This emergency regulation will give me the legal authority to enforce the new federal 80% medical loss ratio for the individual health insurance market in California, even if Congress prevents the federal Department of Health and Human Services from enforcing it,” Jones said in a written statement. “I will be watching very closely to make sure health insurers comply.”

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