Subcommittee on Investigations, Oversight and Regulations
December 15, 2011
New Medical Loss Ratios: Increasing Health Care Value or Just Eliminating Jobs?
The Patient Protection and Affordable Care Act (PPACA) and its regulations require health insurance companies to devote a minimum percentage of the premium dollars to health care services and activities that improve health care quality. This percentage is called the Medical Loss Ratio (MLR). Insurers must spend a minimum of 80% of the premiums of individual and small group market customers on medical claims and no more than 20% on administrative expenses, or pay rebates to their policyholders beginning in 2012.
Under PPACA and its regulations, insurance agent commissions are considered to be administrative expenses. Insurance agents believe classifying them as such will cause insurance companies to reduce their commissions to improve their MLRs.
Some have argued that the MLR requirements will ensure that customers receive the most value for their premium dollars. Insurance agents, many of whom are small business owners and whose customers are often small businesses, believe that the MLR requirements may lead to lower levels of customer service and consolidation in the industry.
Opening Statement:Chairman Mike Coffman (R-CO)
Witnesses and Testimony: