Congressman Paul Tonko praised new regulations issued today by the Department of Health and Human Services that will require health insurers to spend 80 to 85 percent of consumers’ premiums on patient care and efforts to improve care quality. The regulation, which is part of the Affordable Care Act, raises the “medical loss ratio,” and increases transparency and accountability to make it simpler for consumers to purchase plans that provide better value for their money.

“This announcement is a big step forward when it comes to providing consumers the most value for their health care dollars,” said Congressman Tonko. “Premiums paid by consumers should pay for their care and not for administrative overhead, executive salaries, and marketing. This is a critical part of moving health care decision making-power away from insurance companies and placing it squarely in the hands of the American people, where it belongs.”

Starting in 2011, the new rules will require that health insurers spend more of the dollars paid in premiums on medical care and health care quality improvement – 80 percent for small group plans, and 85 percent for large group plans. Insurance companies that are not meeting the medical loss ratio standard will be required to provide rebates to consumers starting in 2012. Insurers will also be required to publicly report how they are spending premium dollars, providing valuable information to consumers. These changes are estimated to save Americans with health insurance up to $4.9 billion in the form of cash rebates, lower premiums, or increased benefits over the next three years.

The Affordable Care Act builds on new rules recently enacted by New York State, which requires insurers to have a medical loss ratio of 82% for individual and small business plans.

The new federal regulations announced today will protect an estimated 75 million insured Americans, and up to 9 million Americans could be eligible for rebates.

More information on the medical loss ratio is available at http://www.healthcare.gov/news/factsheets/medical_loss_ratio.html

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