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Value in Health Insurance: Why It’s At Risk For Women

There’s a new rule in the health care law that holds insurance companies accountable for how they’re spending your premium dollars, ensuring that you get a certain level of value. Already, millions of people have benefited. This week, the powerful Energy and Commerce Committee is debating a bill that would largely gut this rule. While all consumers could lose out on some serious cash, this legislation would be especially harmful to women.

First let’s cover the basics. This new rule is called the “Medical Loss Ratio,” also referred to as the 80/20 rule, and it requires insurance companies to spend at least 80 percent (85 percent for large group plans) of your premium dollars on actual health care and quality improvement activities. Simply stated, this rule ensures that you get your money’s worth out of health insurance. Insurance companies can spend no more than 20 percent of your premium dollars on administrative expenses like salaries and marketing. If insurance companies fail to comply, you get refunded the difference. This rule is keeping insurance companies in check and putting money back in your pockets.

  • $1.1 billion have been refunded as a result of the 80/20 rule.
  • 13 million of you have received a rebate from your health insurance.

The Energy and Commerce committee is debating a bill (H.R. 1206) that would exclude the money that insurance companies spend on agents and brokers from this 80/20 calculation. In other words, any money spent on agents or brokers wouldn’t count toward the 20 percent limit on administrative expenses—essentially creating a loophole for this type of administrative spending. This change would weaken the 80/20 rule to the detriment of consumers:

  • Insurance companies would spend a smaller proportion of your premiums on actual health care expenses;
  • Your premiums would likely increase since insurers could spend your money less efficiently;
  • Less money would be refunded to you; and
  • Insurance companies would have less incentive to reign in administrative spending.

So what does this mean for women? We already know that this change could mean higher premiums and lower refunds for everyone. Given the fact that rebate amounts are proportional to the amount of premium paid, and women pay higher premiums on average, women in the individual market have more to lose if this change goes into effect. For example, a woman in the individual market who is being charged more simply for being a woman would get lower rebates if her insurer fails to meet the 80/20 rule.

In our report, Turning to Fairness, we noted that the vast majority of insurance companies in the individual market charge women more than men for the same policy—a discriminatory practice known as gender rating that could cost women $1 billion a year. Other factors exacerbate the financial implications of this potential change to the 80/20 rule for women including the wage gap (women make 77 cents on average to every $1 that a man makes), and the fact that women are less likely to have employer-sponsored insurance and may seek coverage in the individual market where these discriminatory practices persist.

Women are at increased risk, have more at stake, and more to lose.

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