October 12, 2011 By Elizabeth Festa
Health insurers and HMOs will have to put a larger share of the money they collect from consumers into medical care under a new medical loss ratio (MLR) law that goes into effect Jan. 1, one of 10 new California Department of Insurance (CDI) bills signed by the governor recently.
The MLR law, SB 51, reinforces what is required in the Patient Protection and Affordable Care Act, mandating that $0.85 of every premium dollar paid for group health insurance and $0.80 of every premium dollar paid for small group and individual health insurance goes toward actual medical costs, leaving the remainder to cover other costs, such as agent commissions.
SB 51 enables the insurance commissioner and the Department of Managed Health Care to enforce these new requirements in California. Currently, Insurance Commissioner Dave Jones is enforcing the MLR requirements in the individual market as the result of an emergency regulation he issued on Jan. 3, 2011. SB 51 provides a permanent and additional basis to enforce these new requirements.
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