Starting in 2012, this law states that insurance companies MUST pay a minimum of 80%-85% of all the dollars they collect in premiums towards medical bills they receive (claims).  In other words, if an insurance company collects $100 in a premium, $80 to $85 MUST pay a medical claim.  If at the end of the year they have collected too much from their members, they have to send their members back a “rebate” check, or give the members a credit for a future premium.  The insurance companies must pay 80% of all dollars collected for small businesses and families and individuals for medical claims.  The insurance companies must pay 85% of all dollars collected for large businesses medical claims.  Within the 80%-85% ratio’s, the insurance company can spend money on things that improve healthcare quality also.   If insurance companies worry that the health insurance market in Nevada will become unstable due to the strict MLR requirements, they can request the Department of HHS to make an adjustment to the MLR.  When you hear someone talk about their Premiums Going up, have them read this definition and explanation.

This medical loss ratio requires all insurance companies to send detailed reports to the Government about money being spent.  All States, all plans, the reports are a big responsibility and will be very time consuming for the insurance companies to comply with.  Self-insured plans do not have to comply with this requirement (this is a big deal) which means we’ll probably see more self-insured plans.  Grandfathered plans do have to comply.