The Patient Protection and Affordable Care Act was created by the Obama administration to improve the health care system in the United States. More specifically, it aims to reduce the number of people going without any form of health care coverage. One of the controversial mandates of the new health care reform law is the Medical Loss Ratio (MLR).
What Is The Medical Loss Ratio All About?
Medical loss ratio is the percentage of premium dollars spent on medical care and healthcare quality improvements versus administrative costs. Under the medical loss ratio mandate of the health care reform law, starting 2011, all insurance companies are required to maintain a MLR of 80 percent for small group and individual health insurance plans and 85 percent for large group plans. The remaining percentage should be spent on administrative costs. If an insurance company could not comply with this mandate, they would be required to issue rebates to their plan holders by 2012.
Texas Filed A Waiver For The Implementation Of The MLR
States are allowed to file a waiver to the secretary of Health and Human Services (HHS) Kathleen Sebelius if they think the MLR requirements would pose a risk of destabilizing their insurance market. It would be the decision of the secretary of HHS if she would grant the state a waiver or not.
Since the passage of the health care reform law, the HHS has received 15 requests for exemption from the MLR mandate. Texas was one of the states who submitted a request regarding the medical loss ratio requirements for the individual and small group Texas health insurance plans. Texas Department of Insurance believes that the mandate will disrupt their state’s individual and small group insurance plans.
Currently, out of the 15 states who filed waiver requests, only one was fully approved. Five requests were granted limited approval and six were rejected right then and there. As for Texas and two other states, their fate still lies in the hand of HHS because they are waiting for the decision.
How Will The MLR Mandate Affect Texas Health Insurance Premiums?
According to Spencer Harris, Texas health care policy analyst, the MLR mandate can be damaging because it interferes with the way insurance companies run their business. Instead of the main purpose of lowering premiums so people can afford getting healthcare, it might have the opposite effect.
The medical loss ratio mandate might even raise Texas healthcare coverage premiums. This would force a lot of insurers to stop doing business or leave the state. If this happens, competition among insurers will be limited driving up the prices of healthcare coverage.
While waiting to see the changes to Texas health insurance, why not take a closer look at your health care spending? There are plenty of things that you can do to lower your health insurance premiums without compromising the quality of healthcare that you receive. You can get a high-deductible Texas health insurance plan to get lower premiums. You may also consider pairing it up with an HSA to enjoy tax-free benefits.