The Department of Insurance already regulates a 70% medical-loss ratio on insurers of individual health plans so it was not a huge leap to bump that limitation to 80%, given the new federal standard at that level, according to Janice Rocco, deputy commissioner of health policy for the DOI.
"We maintain the [current state requirement of a] 70% medical-loss ratio," she said, "and we also need to comply with the federal 80% ratio, which is calculated in a different way than the state ratio."
The state Office of Administrative Law agreed, and yesterday granted the Insurance Commissioner and his department the authority to enforce those federal standards.
"Insurers in California will be required to follow the federal law in any case," Rocco said, "whether it's enforced at the federal or state level."
There is one big difference now, though, she said. "There is a benefit to policyholders and providers that we spend 80% at the rate filing," Rocco said, "rather than waiting for a federal review." That review, she said could happen 12 months after the rate filing.
"People want to get what pay for up front, rather than wait 12 months for it," she said.
Medical-loss ratio refers to the percentage of the premium money insurers spend on actual medical services.
There is one other benefit to consumers from the state enforcement of the federal law: If enforcement power is stripped out of the federal plan, the law would remain but not be enforced. This way, the state guarantees that the federal law goes into practical effect.
That's what Jones addressed in his statement released to the press:
"This emergency regulation will give me the legal authority to enforce the new federal 80% medical-loss ratio for the individual health insurance market in California," Jones said, "even if Congress prevents the federal Department of Health and Human Services from enforcing it."