To address the misuse of health insurance premiums, legislators in
California recently passed tougher standards regulating how insurance
companies use premiums. The law is designed to put teeth into the
basic expectation that health insurance premiums paid by families and
businesses should be used by insurance companies for actual medical
care. Sponsored by
State Senator Sheila Kuehl, legislators passed
SB 1440,
which creates a "medical loss ratio" of 85% - or "care share" -
requiring insurance companies to spend at least 85-cents of every
premium-dollar on actual medical care. Governor Schwarzenegger has yet
to act on the bill, but the legislation was
amended at his request to exempt new plans from the 85% threshold for the first two years they are available, signaling that his signature is likely.