On September 23, several changes to Texas health insurance effected every health insurance company in Texas. The changes steam from maximum payout policies , caps taken off drug cards to preexisting condition policies to eligibility requirements for guaranteed issue for children under 19 forcing insurance company’s to take child only policy’s off the market, 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” and how it will effect insurance brokers.
Medical loss ratios are calculated by taking the total premium a policy holder pays in premium , and dividing by the amount an insurer collects in premiums. The HCRA law mandates that individual and small business insurance policy’s must spend at least 80% of their deposited premiums on health plans, while large employer plans (defined as just 50 or more employees) must spend at least 85 percent of premiums on health care.
Now how does the Obama HCRA discern funds used for health care versus funds used for other purposes such as agent commissions? If protecting policy holders against fraud and working with hospitals to implement a plan that would align medical records and 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).
Select states are already negotiating 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.
These mandates put affordable Texas health insurance options in jeopardy, and insurers have only a few months to adjust large portions of their budget. An health insurance company’s 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. Also on the chopping block is Texas health savings accounts. The National Association of Insurance Commissioners ignored HSAs when drafting the guidelines.
The public has known that big changes are in store for Texas health insurance. Some just took effect, and more are on the way. We can only hope that once the law settles, you will be able to keep your affordable Texas health insurance as promised.