The new Affordable Care Act medical loss ratio requirement may be leading to health insurance rate cuts in some communities, Charles Boorady says.
Boorady, a securities analyst in the New York office of Credit Suisse Securities (USA) L.L.C., has included that thought in a comment on April managed care plan renewals.
Few employers renew their health plans in April, but brokers and insurers are reporting that April renewal activity was softer than usual, Boorady says.
“We attribute weakness mainly to insurers cutting price in markets where a rebate would otherwise be paid to meet new minimum loss ratio requirements,” Boorady says.
Efforts to cut the commissions paid to agents and brokers could also cause problems for health plan renewals this year, Boorady says.
Boorady was referring to the minimum medical loss ratio (MLR) provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA). The MLR provisions require health insurers to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care or quality improvement efforts.
If insurers fail to meet the minimum health care spending requirements, they may have to provide rebates.
Many agents and brokers say health insurers have been using the PPACA MLR provision as a justification for cutting individual and small group commission rates as much as 50%.
- Allison Bell