Posts Tagged - ‘medical loss ratio’

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Are Health Insurance Brokers An Endangered Species?

Tuesday, November 30th, 2010

Image: H. Michael Karshis under CC 3.0

In many states, regulators fear that health insurance brokers are falling by the wayside. The healthcare reform law passed this year requires that a certain percentage of premiums be spent on providing medical care, as opposed to being spent on administrative costs.

Some consider brokers as middlemen, standing in the way of affordable health insurance by creating yet another level of bureaucracy. However, they can help people navigate the confusing variety of plans available and shop around–although that purpose may become irrelevant once states get their own health insurance exchanges up and running.

In addition, many brokers may end up out of work if they cannot adapt to the changes in the market and regulatory environment.

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State Health Insurance Commissioners To Rule on Medical Loss Ratios

Thursday, October 21st, 2010

Image: turtlemom4bacon under CC 3.0

All eyes are on Orlando today, but not because of anything Mickey Mouse has done. Rather, it is a meeting of several states’ insurance commissioners. Their topic: coming up with the rules that insurers will have to abide by post-healthcare reform.

Specifically, they are responsible for calculating minimum medical loss ratios. MLRs are also known as the percentage of premiums spent on providing health care, as opposed to profits and administrative expenses. Proponents of the limits believe that they will result in more affordable health insurance for consumers. However, some are worried that the new rules will make some niches and entire markets–such as small groups–less appealing, and that people will become uninsured as a result.

The group’s recommendations will become effective next year. Although the already-determined limits are 85% for large group plans and 80% for small groups and individuals, the commissioners will consider tax exemptions and a longer phasing-in period. Most significantly, they will help determine what counts as a medical expense. Insurers obviously want a wider definition of qualified medical costs.

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Health Insurance Plan Agents May Suffer Under Reform

Friday, August 27th, 2010
health insurance plan
Image: Jennifer Feuchter under CC 3.0

Although healthcare reform tries to help many, it will end up hurting at least some. For example, the business model of many health insurance brokerages and agencies is in danger.

Provisions involving medical loss ratios, which include agent commissions in the “administrative” category that will be regulated and limited, will have a negative effect. In addition, brokerages may be made redundant by the state insurance exchanges and accompanying websites that must be launched by 2014. On the bright side for them, the National Association of Insurance Commissioners passed a resolution that affirmed the importance of licensed insurance professionals.

With the possibility of a double-dip recession looming, more job losses is obviously a downside. However, industry experts predict that these companies have several options for adaptation. Hopefully, their experience in navigating the complexity of the market and helping people decide on a health insurance plan will still be in demand. Their compensation model may also be adjusted in favor of flat fees instead of commissions.

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States Need More Time To Develop Health Insurance Spending

Monday, May 24th, 2010

As part of its healthcare reformlegislation, the Obama administration has asked states to come up with recommended medical loss ratios.

These ratios are the percentage of health insurance plan
premiums that actually go towards providing health care to policyholders. The law mandates a certain minimum level.

However, the states (represented by the National Association of Insurance Commissioners) claim that they need at least one more month past the late May deadline to finalize their report.

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Sen. Rockefeller Accuses Health Insurance Companies of Weakening Reform

Tuesday, May 11th, 2010

Image: West Virginia Blue under CC 3.0

Health insurance reform is already starting to make many changes to how insurers do business. Obviously, they were opposed to the legislation, but since it passed they have been attempting to ensure that it’s enforced in the most favorable way.

Democratic Senator Jay Rockefeller thinks they may be going too far in trying to weaken healthcare reform provisions. He accuses them of hiring lobbyists to water down the spending rules that will force them to spend higher percentages of the health insurance plan premiums collected on providing medical services (as opposed to shareholder dividends or administrative costs). The National Association of Insurance Commissioners (NAIC) and Secretary of Health Insurance Kathleen Sebelius must make their recommendations on the issue by June 1st.

Specifically, he is warning the Obama administration of accounting and statistical tricks that mask the fact that while many insurers already meet the new standards (a medical loss ratio of 85% in large group policies and 80% for individual and small group policies) in many products and areas, they are not yet universally compliant–although they may aggregate their information together in a way that claims to be. In addition, they may be trying–in advance of the 2014 deadline–to classify as many costs as possible as medical expenses.

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What United Healthcare 4th-Quarter Earnings Mean For You

Thursday, January 21st, 2010

Major individual health insurance provider United Healthcare just released its 4th quarter earnings report for 2009. It showed that the health insurance company’s net earnings increased by 30% to nearly $22 billion. Investors were pleasantly surprised, but what does this news mean for the average consumer?

Looking deeper, it seems that much of the increase was due to United Healthcare‘s lower medical loss ratio (MLR) decreasing. The medical loss ratio describes the percentage of health insurance premiums that is actually spent on providing medical care (as opposed to covering administrative expenses–including CEO salaries–and stock dividends). Wall Street was expecting that the insurer’s MLR would be 83%, but it turned out to be only 81.3%. Financial analysts speculate that the H1N1 flu being less severe than expected in the U.S., in addition to a decrease in Medicare costs, is responsible. However, the lower medical insurance costs are usually not passed onto consumers.

Obviously, shareholders are happy with the increase in profits; but is this the best news for consumers? United Health Care, like many health insurance providers, may be tempted to cut costs by decreasing the quality of care and/or raising health insurance rates in order to maintain its profit margin. The healthcare reform bill proposed by Congress would legally require that insurers’ medical loss ratios were above a certain level, i.e. 85 percent. The recent election of Scott Brown in Massachusetts puts that provision in doubt.

(Image: United Healthcare Website)

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