Under a federal determination released today, insurers in Texas will have to abide by spending rules set forth in President Obama’s signature health care reform package.
One of the provisions in the Affordable Care Act stipulates that insurers must spend 80% of customers’ premium dollars on medical care, and not overhead costs. Any overhead spending over 20%, and insurance companies would be required to issue rebates to their customers.
That said, states can apply for an adjustment of to increase the amount they spend on overhead. The Texas Department of Insurance applied to do just that, requesting to ramp up medical care spending more slowly: 71% for (current) reporting year 2011, 74% for 2012, and 77% for 2013.
Today, the Department of Health & Human Services (HHS) rejected Texas’ request, issuing both a 14-page determination, and a brief fact sheet outlining their decision. They offered four reasons for their decision:
In general, Texas’s application shows that the State has a competitive individual health insurance market, which should ensure that consumers continue to receive adequate coverage. Evidence in Texas’s application shows that nearly all issuers in the Texas individual market either: Already meet the 80 percent MLR standard, Have indicated they will not exit the market, Are sufficiently profitable to provide rebate payments if they fail to meet the 80 percent MLR standard, or Are adapting their business models in order to provide consumers better value for their premium dollar.
The 80% rule is one of several changes to health care under the Affordable Care Act, several of which took effect Jan. 1 this year. An interactive timeline of additional changes is online at the HHS HealthCare.gov website.
