AB 458

Current law does not specify loss ratios that health insurers must achieve. This

bill provides that, in each plan year that begins after December 31, 2010, an insurer

that issues an individual or group health benefit plan must achieve a specified

medical loss ratio. For individual and small group health benefit plans, that ratio

is 80 percent. For large group health benefit plans, that ratio is 85 percent.

Under the bill, the medical loss ratio is the ratio of the amount of premium

revenue that the insurer spends on medical costs to the total premium revenue.

Medical costs are defined in the bill as costs to provide medical services, supplies, and

equipment and prescription drugs to insureds, as well as the cost of activities to

improve health care quality. Health benefit plans are defined in the bill as any

hospital or medical policy or certificate, but various types of limited coverage, such

as limited-scope dental or vision plans, separate hospital indemnity policies, and

automobile medical payment insurance, are excluded. Small group health benefit

plans are those provided by or through an employer with 100 employees or fewer, and

large group health benefit plans are those provided by or through an employer with

at least 101 employees.

The medical loss ratio requirements apply to all individual and group health

benefit plans issued in this state, including defined network plans, health care plans

operated by cooperative associations, and health benefit plans offered by the state

to its employees and to municipal employees.