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News: 2012 Press Release
For Release: February 9, 2012
Media Calls Only: 916-492-3566
Emergency Regulation Requiring Health Insurers to Put More Premiums Into Medical Care, Not Overhead and Profits, Is Made Permanent
Another Critical Step in Implementing Healthcare Reform
Insurance Commissioner Dave Jones today announced that the Office of Administrative Law (OAL) approved his request to make permanent the emergency regulation he issued last year requiring health insurers to put a larger share of premiums into actual medical care instead of overhead and profits. The regulation, issued by Commissioner Jones, requires that health insurers put at least 80 percent of premiums collected from individual policyholders into medical care. The regulation implements a key component and requirement of the federal Affordable Care Act (ACA).
"This action fulfills the commitment I made at my inauguration last year when I issued an emergency regulation to require a larger share of premiums to go to medical care instead of profits and overhead," Commissioner Jones said. "Ensuring that more of consumers' premium dollars go into actual medical care - and not into insurance industry profits and administrative costs - is one of the most important components of federal health care reform."
The new state regulation is also stronger than the federal law. Under this now permanent regulation, the Insurance Commissioner applies the 80 percent standard at the time a rate is filed with the Department of Insurance rather than only after the consumer has paid the entire year's premium. The federal government is not applying the medical loss ratio at the time the rate is implemented. Under federal law, a consumer who pays a premium in excess of the federal medical loss ratio requirement waits until the following year for a refund. Under the new state regulation, the Commissioner can evaluate whether the required percentage of premium goes into medical care at the start, instead of waiting until the end of the year to see if health insurers are dedicating the required percentage of premium to medical care.
"As health insurance rates continue to climb and as I continue to lack the legal authority to reject excessive rate hikes, at a minimum Californians should know that at least 80 percent of their premium dollars is going to pay for health care as the law requires," said Commissioner Jones.
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