US Health Insurers Face New Spending Rules

Monday, 22 Nov 2010 09:36 AM

 

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WASHINGTON - U.S. health insurers face a host of new spending rules under federal government regulations released Monday that dictate how they allocate customers' monthly premium dollars toward medical care rather than other items such as profits or overhead.

Such spending limits, known as a medical loss ratio or MLR, were required under the healthcare overhaul passed in March and largely reflect earlier recommendations by a key group of state insurance regulators.

Uncertainty over the final rules has hung over the health insurance industry. Companies have said they were waiting for the rules to become concrete before giving specific financial outlooks for next year, while investors have been hesitant to buy into the group.

Health insurer stocks were broadly trading higher after the release of the rules.

The new MLR rules will help "guarantee that consumers get the most out of their premium dollars," U.S. Health Secretary Kathleen Sebelius said at a press conference, adding that "overhead costs contribute little or nothing to the care of patients and health of Americans."

The rules affect insurers such as Aetna Inc, Cigna Corp, Humana Inc, UnitedHealth Group Inc and WellPoint Inc, among others.

In releasing the final rules, HHS officials said they followed the advice of the National Association of Insurance Commissioners (NAIC) on many issues such as taxes, state waivers and consumer rebates.

The healthcare law requires large group health plans to allocate at least 85 cents per premium dollar to medical care, not administrative costs or profit. Plans for individuals or small groups must spend 80 cents per dollar.

If plans do not spend at least that much on care, policy holders get a rebate. HHS said Monday up to 9 million Americans could be eligible for up to $1.4 billion in rebates starting in 2012.

The rules are posted on the HHS website at http://link.reuters.com/gyf66q (Reporting by Susan Heavey; Additional reporting by Lewis Krauskopf in New York; Editing by Dave Zimmerman)

© 2014 Thomson/Reuters. All rights reserved.

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