October 29, 2010
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Healthcare Reform. A topic that dominated the airwaves for months as President Obama and the Democrats attempted (and succeeded) to passing major legislation changing the way we do health care in America. Later, we will discuss how what was passed wasn’t as much healthCARE reform as much as it was healthINSURANCE reform, but we’ll discuss that later. For now, lets discuss MLR.
MLR, or medical loss ratio, is the amount of each dollar an insurer takes in that much be used to pay for medical coverage. The concept is simple: when you the insured pays a dollar of premium to, say, United Health Care, UHC is required to spend a certain amount of that dollar on things related to patient care.
Currently, that ratio is all over the map and depends on carrier as well as individual state mandates. One may find that one carrier’s ratio may be in the 70s, while another carrier may be in the 90s. But that is about to change. New rules will require all carriers to have a MLR in the 80% to 85% range. If a carrier is found to have a ratio exceeding that, they will be require to pay a rebate or refund to plan participants. So, consumers are definitely going to get more bang for the buck, right?
Maybe. Maybe not.
There are at least 2 ways that the new provision will most likely negatively affect consumers. First, there are already carriers that are getting out of the major medical insurance business because they will not be able to comply. “Big deal!” most will say. But we all know what happens when we have fewer providers to pick from. The amount we as consumers spend goes up because each carrier gone reduces competition. Second, carriers are going to begin cutting commissions to insurance brokers and agents. For many, that’s not a big deal and they could care less about it. But there are a significant number of consumers who prefer the ability to deal with an agent who is available to explain plans and coverages as opposed to calling a particular carrier’s customer service line. When those agents disappear, consumers will find themselves on their own in regards to figuring things out.
All this isn’t to say MLR is a bad thing. But knowing how it may affect you is a GOOD thing!