Exchange Board approves recommendation to limit insurer administration and profits

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At yesterday’s meeting the CT Health Insurance Exchange Board unanimously approved a motion recommending that the state pass legislation limiting the amount of premiums insurers can spend on administration and profits, the Medical Loss Ratio (MLR), beyond the limits included in the federal Affordable Care Act (ACA). OPM Secretary Barnes made the recommendation in response to concerns about expected very large insurance premium increases next year. Reducing the amount of administration and profit insurers can charge to consumers will serve to control costs. Secretary Barnes’s proposal, adopted by the Board, was to limit administrative/profit costs to 15% of premiums for all individual and small group insurance sold in CT, both inside and outside the exchange. The ACA limits administrative costs to 20% for individual and small group plans. Even at that level, last year 137,000 CT residents received rebates averaging $168/family, from insurers who spent too much on administration and profit. Twenty-nine states have separate MLR standards, several stronger than the ACA floor, either through a lower % allowed or with a more limited definition of which expenses are considered administrative. The Secretary said he had not spoken to legislators about the proposal but would make calls yesterday after the meeting and suggested that it could be amended to existing bills for passage.