The Patient Protection and Affordable Care Act contains a provision that may force smaller insurance companies like Fallon Health Insurance out of the individual insurance market completely. According to “Actuary: Act Fast, Or Individual Health Insurers Will Flee,” Allison Bell of Life and Health National Underwriter summarizes the dilemma. The minimum medical loss ratio requires health providers to spend 80% or more of their premium revenue on paying the medical claims of their insureds. Experts recommend regulators come up with a way for companies to make this transition. They worry that smaller companies will opt out of providing individual health insurance because of this new provision. If that is the case, they would most likely have to let insureds know by June to give them a 6 month warning that they won’t offer individual coverage next year.
Those hoping for some transitions to be spelled out would like to see them immediately so companies know before making the decision to leave the individual market. The idea behind the 80% medical loss ratio is that insurance companies like UPMC would just reduce administrative costs and other costs they have not related to claims. It might be hard for insurers to reduce those costs so quickly, not to mention the fact that it will likely hurt smaller insurers much more. In order to stay competitive, smaller insurance companies offer lower rates for the same coverage as larger companies and have higher marketing and administrative costs. One suggested solution is to make the minimum medical loss ratio smaller for insurance companies with less market share or for those who sell low-cost plans like high deductible insurance. Without any changes it is very possible that more smaller insurers will stop selling individual health plans.
