Starting in 2011, insurers serving the individual or small-group market — i.e., companies with 100 employees or less — must have MLRs of at least 80%. For large groups, it's 85%. Violate those minimums and an insurer must rebate the difference to policyholders.An MLR is "medical loss ratio", or the percentage of health premiums used to pay medical costs. The difference is used to pay administrative costs and advertising. While at first this might seem like a reasonable regulation, it is one that can be met only by a few of the largest insurance companies. The effect of the regulations will be to drive smaller (but often more innovative) companies out of the health care business.
"What we need is lots of creativity and innovation in payment processes and new ways of managing care," said James Capretta, fellow at the conservative Ethics and Public Policy Center. "Instead, what we're getting is a regulatory process that is ratcheting down on creativity and innovation in a way that is dangerous."
The Department of Health and Human Services has asked the National Association of Insurance Commissioners, the organization representing state insurance officials, to study MLR guidelines used by the states. Interestingly, Ohio (according to the article) sets an MLR of 80% for health insurers in all markets -- which might explain why so many Ohioans are unhappy with their health insurance.
If these regulations are implemented, it appears likely that things will get worse; but then, it only supports a pattern we have seen for some time: big government supports big business at the expense of the taxpayers.