The California Office of Administrative Law has approved an emergency regulation issued by Insurance Commissioner Dave Jones in 2011 that requires health insurers to put at least 80% of premiums collected from individual policyholders into the cost of medical care.
Under the medical-loss ratio rule included in the federal health reform law, private insurers are required to spend at least 80% in the individual market or 85% in the group market of their premium dollars on direct medical costs.
Jones said: "Ensuring that more of consumers’ premium dollars go into actual medical care and not into insurance industry profits and administrative costs is one of the most important components of federal health care reform."
According to Insurance Journal, under the current federal law, a customer who pays a premium in excess of the federal medical loss ratio requirement has to wait until the following year for a reimbursement.
However, Jones can evaluate under the regulation whether the required percentage of premium goes into medical care at the beginning, instead of waiting until the year end to see if health insurers are dedicating the required percentage of premium to medical care.