Thursday, September 30, 2010

Medical Loss Ratio Compromise

Under the health reform law, insurers will have to spend 80-85% of premium dollars on health care related expenses, thereby limiting the amount that can be spent on administration. The National Association of Insurance Commissioners was charged with the task of delineating what counts as health care vs. administrative costs. They have reached a compromise that, according to Timothy Jost, an expert at Washington and Lee School of Law, strikes a good balance and leans in favor of consumers.

By limiting administrative costs, not only should dollars spent on health care lead to increased quality, but premiums should come down because insurers will not be allowed to build in huge salaries and bonuses. NAIC's process has been long but very transparent and fair, allowing for comments at all stages of the process.

This is a critical piece of the health reform puzzle. Congress was right to delegate it to the NAIC. Jennifer

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