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CA Department of Insurance

Insurance Commissioner Dave Jones Applauds Governor for Signing Bill Requiring Insurers to Put Larger Share of Premiums Into Medical Care

News: 2011 Press Release

For Release: October 10, 2011
Media Calls Only: 916-492-3566
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Insurance Commissioner Dave Jones Applauds Governor for Signing Bill Requiring Insurers to Put Larger Share of Premiums Into Medical Care
SB 51 will provide California Consumers better value for their premium dollars

Insurance Commissioner Dave Jones today announced that Governor Jerry Brown signed SB 51, which will incorporate the medical loss ratios (MLR) required by President Obama's Patient Protection and Affordable Care Act (PPACA) into state law. The measure was sponsored by Insurance Commissioner Dave Jones and authored by State Senator Elaine Alquist (D-Santa Clara). The "medical loss ratio" is the ratio or percentage of premium collected by health insurers and HMOs that is allocated to pay medical providers for medical care versus that portion of the premium which goes to insurer or HMO overhead and profit.

"SB 51 requires health insurers and HMOs to put a larger share of the money they collect from us into actual medical care instead of overhead and profits," said Commissioner Jones. "While it does not control or limit health insurance rate increases, SB 51 does make sure that as rates continue to rise insurers are required to put a larger share of our premiums into paying for actual medical care. I want to thank Senator Alquist for authoring this important healthcare reform bill and the Governor for signing it into law."

In March 2010, the President signed the PPACA into law. PPACA requires HMOs and health insurers to have a medical loss ratio of 85 percent for large group health insurance and 80 percent for small group and individual health insurance - meaning that insurers and HMOs have to put 85 percent of what they collect from large employers and 80 percent of what they collect in premium from individuals and small employers into actual medical care. In California not too long ago health insurers had medical loss ratios as low as 60 percent. PPACA also requires rebates to consumers and employers if these MLR requirements are not met.

SB 51, which goes into effect on January 1, 2012, incorporates into state law the new federal requirements. SB 51 enables the Insurance Commissioner and the Department of Managed Health Care to enforce these new requirements in California. Currently, Insurance Commissioner Dave Jones is enforcing the medical loss ratio requirements in the individual market as the result of an emergency regulation he issued on January 3, 2011. SB 51 provides a permanent and additional basis to enforce these new requirements.

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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