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The Affordable Care Act requires that 80-to-85% of the money collected by insurance companies be spent on health care services and health care quality improvement.  Otherwise known as the Medical Loss Ratio, the intent of the provision is to ensure that more of the money enrollees pay each month for insurance premiums will go toward actual health care and improving the quality of health care that insurers provide.

This provision is important for people with rare and chronic diseases because requiring insurers to publicize the amount of premium dollars spent on administration will help to expose the sometimes abusive utilization review and appeal practices undertaken by insurers.  It will also help to illustrate the role utilization review plays in controlling costs.

According to Advocacy for Patients With Chronic Illness, insurers are permitted to limit coverage to treatments that are medically necessary. In addition, insurers are permitted to make decisions about whether an expensive treatment will be beneficial to the patient.  However not all insurers limit denials of coverage to circumstances in which the treatment truly is experimental or investigational, or not medically necessary. This sometimes leads to denial of coverage for treatments that to many are medically necessary. Most consumers do not have the resources needed to fight health insurance denials. Requiring insurers to report publicly the percentage of administrative costs that are spent on utilization review and appeals could help to determine if an insurer may be abusing its right to conduct utilization review. This data could also be used by States to evaluate the reasonableness of rates and take action against insurers that are spending an unusually high percentage of premium dollars attempting to curtail coverage.

To read the NAIC proposed regulation click here.

To learn more about Medical Loss Ratio visit www.healthcare.gov

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