Insurelane Insurance Blog

There’s a new federal requirement in America that states all health insurance companies must spend at least 80 per cent of the money they receive from premiums on actual medical care. However, the insurance regulator for the state of Wisconsin is asking the government to exempt local insurers from this rule.

The Office of the Commissioner of Insurance is asking the government to allow the new rule to be implemented in three separate phases instead of all at once. Ted Nickel, who is the commissioner of insurance, would like to see just 71 per cent of premiums spent on medical care this year then 74 per cent in 2012 and 77 per cent in 2013.

Nickel said that if insurance companies are forced to spend 80 per cent of premiums from individuals and small employers on medical care then some of them might stop selling health policies and the citizens of Wisconsin will suffer from lack of insurers. According to Nickel, six of the two dozen insurance firms that sell policies in the individual market might suffer from the federal rule since the law would require them to pay their customers rebates if they don’t hit 80 per cent.

It didn’t come as a surprise when Rep. Jon Richards of Milwaukee criticized Gov. Scott Walker's administration and Nickel for worrying about big insurance companies instead of their customers. Richards said the interest of the consumers should come before insurance companies especially when the government is trying to slash the cost of health care.

However, most of the insurance firms in Wisconsin said they wouldn’t have a problem meeting the 80 per cent threshold, but these were mainly non-profit clinics or health care systems. Nickel insisted that there are a lot of obstacles to hurdle though for insurers to spend 80 cents of each dollar on medical care. He added that six insurance companies spent less than that last year.

According to an article by the Milwaukee Wisconsin Journal Sentinel these firms spent just 65 to 72.9 per cent of each dollar on medical care and they make up about a third of the market in Wisconsin when it comes to individual health insurance.

A survey carried out by the Kaiser Family Foundation found that Wisconsin possesses the country’s most competitive market when it comes to health insurance that’s purchased by families and individuals. They feel there would be lots of insurers to purchase plans from even of these six companies dropped out of the market.

Robert Kraig, who is the Citizen Action of Wisconsin’s executive director, said that state regulators are suggesting that the insurance companies should be allowed to keep the money that should be sent out to customers as a rebate if they don’t spend the required 80 per cent.