A health reform provision requiring insurers to spend 80 percent of premium revenue on medical care, versus administrative costs, is gaining attention from policy-makers and analysts.
An issue brief from the Robert Wood Johnson Foundation’s Changes in Health Care Financing and Organization (HCFO) program explores these “medical-loss ratio” (MLR) standards in the individual insurance market, as well as provisions for safeguarding against potential market destabilization brought on by the new standards.
According to the brief, the law allows the government to adjust the MLR standard if it may destabilize a state’s health insurance market. The brief highlights signs of market destabilization and approaches that states have taken to protect consumers, including:
The authors conclude that greater understanding of how well these policies have worked could help policymakers be ready if individual markets experience trouble during reform implementation.