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PSN on March 6, 2008 - 8:21am
On Friday, the Washington State Legislature enacted SB 5261 which will restore state oversight of the individual health insurance market. The law authorizes the Insurance Commissioner to disapprove unreasonable rate increases and establishes a sliding-scale medical loss ratio for insurers.
As Families USA discusses, medical loss ratios require insurers to spend a certain amount of premium revenue on direct medical care. These laws help ensure more of our premiums are used on medical care and less on administrative costs, including profits and bonuses. The Washington bill sets up a tiered loss ratio that is tied to the number of people an insurer denies for coverage. For example, a rate of denial under 6% equals a loss ratio of 74%, meaning 74-cents of every premium dollar must be spent on medical care. Insurance companies that deny coverage to more people, more than 8% for example, face a loss ratio of 77%.
Washington State had ended rate review in 2000. But after years of premium increases and broken promises by insurers not to increase premiums, lawmakers decided to hold insurer's accountable. The debate was fueled by estimates that insurers have surpluses totaling $1.4 billion and a report by the Seattle Post-Intelligencer that a state-based non-profit insurer transferred $49 million in premium revenue over the past three years to a faltering for-profit subsidiary in Arizona.
The rate oversight bill was a key legislative goal of the Healthy Washington Coalition, a broad coalition of health care advocates and stakeholders working to "achieve secure, quality, affordable healthcare for all Washingtonians."