The California Office of Administrative Law has given the California insurance commissioner the authority to consider a health insurer’s projected medical loss ratio (MLR) when deciding whether an individual health premium increase request is reasonable.
Dave Jones, the current California commissioner, has been including MLR projections in individual health product rate reviews using an emergency regulation.
The administrative office decision makes the emergency regulation a permanent regulation, Jones says in a statement.
An MLR provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) already requires health insurers to spend at least 80% of major medical revenue on health care and quality improvement efforts.
If health care and quality improvement costs amount to less than 80% of premium revenue, a carrier must compensate individual policyholders by sending them rebates.
The California rule is more strict, because it gives a commissioner the ability to apply MLR standards up front, rather than requiring a consumer to pay premiums for a full year before getting a chance to receive a rebate, Jones says.
Jones issued the MLR emergency regulation in 2010, at his inauguration.