WASHINGTON — The Obama administration issued new federal rules on Monday that will require many health insurance companies to spend more on medical care and allocate less to profits, executive compensation, marketing and overhead expenses.
The rules, intended to benefit consumers, vastly expand federal authority to direct the use of premiums collected by companies like Aetna, Humana, UnitedHealth and WellPoint. While some states have had such requirements, Monday’s announcement is the first such mandate by the federal government and grows out of the new national health care law.
“Millions of Americans will get better value for their health insurance premium dollar,” Kathleen Sebelius, the secretary of health and human services, said in issuing the rules.
Ms. Sebelius said the rules would protect nearly 75 million people: 10.6 million with individual policies, 24.2 million with small-group coverage and 40 million covered by large employers.
Starting next year, she said, insurers in the individual and small-group markets must spend at least 80 percent of their premium revenues on medical care and activities to improve the quality of care. Insurers in the large-group market must spend at least 85 percent of premium dollars for those purposes.
Insurers that do not meet the standards next year will have to pay rebates to consumers, starting in 2012. Ms. Sebelius estimated that up to nine million people could get rebates worth up to $1.4 billion. About 45 percent of people with individually purchased insurance are in health plans that do not meet the new standards, known as medical loss ratios, federal officials said.
I can't wait for the hysterical freak out by the teatards.