A Robert Wood Johnson Foundation (RWJF) brief examines the effects of health care reform’s medical loss ratio (MLR) provisions on the individual insurance market.  Under the law, insures must spend 80 percent of premium revenue on medical care.  However, the federal government may adjust the MLR standard if officials believe it may destabilize a state’s insurance market.  RWJF highlights signs of such market destabilization and approaches states have taken to protect consumers from destabilization.  RWJF highlights state efforts to protect consumers by extending coverage protection to consumers affected by market exits, designating “insurers of last resort,” and opening state high-risk insurance pools to all qualified individuals.

From the report:

As health reform moves forward, the medical loss ratio (MLR), designed to indicate how much of the premiums collected from consumers actually pay for health care services and clinical quality, will take on new significance for plans competing in health insurance markets. Plans that do not meet minimum statutory MLR standards will be required to provide rebates to enrollees. For the individual market, the law gives the secretary of the Department of Health and Human Services (HHS) the authority to make adjustments to the MLR standard if she determines that it may destabilize a state’s health insurance market.

Full report: Recognizing Destabilization in the Individual Health Insurance Market (PDF | 234.7 KB)   

Robert Wood Johnson Foundation. (2010). Recognizing destabilization in the individual health insurance market.