On September 23, several changes to Texas health insurance plans went into effect. The changes influence everything from maximum payout policies to preexisting condition policies to eligibility requirements, but perhaps the most important amendment to our health care system is the government’s mandate for how insurers must calculate their “medical loss ratios.”
Medical loss ratios are calculated by taking the amount an insurer spends on the health care of its customers, and dividing by the amount an insurer collects in premiums. The new health care law mandates that individual and small business insurance plans must spend at least 80 percent of their collected premiums on health care, while large employer plans (defined as just 50 or more employees) must spend at least 85 percent of premiums on health care. On the surface, it may sound consumer friendly, but once you dig into the details, the implications are frightening.
First, how does the government discern funds used for health care versus funds used for other purposes? If protecting consumers against fraud and working with doctors to assure smooth alignment of medical records is considered administrative and not an “activity that improves health care quality,” then insurers will have to eat those costs (unlikely), pass them onto consumers (likely) or stop the activities altogether (also likely).
Certain states are already pleading with the federal government to waive or delay the medical loss ratio rules, but the law’s language gives regulators little flexibility in waiving the MLR requirements, which must be in effect by January 1, 2011.
Such guidelines put affordable Texas health insurance plans in jeopardy, as insurers have only a few months to cut large portions of their budget. An insurers’ first goal should be patient protection, but many patient-oriented activities are in danger of being scrapped to account for the government-imposed MLR requirements. And adding to the confusion, the status of Texas health savings accounts is unknown, as the National Association of Insurance Commissioners ignored HSAs when drafting the guidelines.
We’ve known for awhile now that big changes are looming for health insurance. Some just went into effect, and more are on the way. Let’s hope that once the dust settles, affordable Texas health insurance is still an option for us all.
