Texas Health Insurance Companies Dropping Rates to Comply with Healthcare Law


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April 3, 2012

Texas Health Insurance Companies Dropping Rates to Comply with Healthcare Law

According to recently released information from the Texas Department of Insurance (TDI), several health insurance providers, including that state’s largest insurer Blue Cross Blue Shield, are dropping health insurance rates ahead of new Medical Loss Ratio rules that will soon force low value carriers to provide rebates to policyholders.

“Not only are we seeing rate increases much smaller than in previous years, but many carriers are actually dropping rates for policyholders,” said Blake Hutson of Consumers Union, the policy and advocacy division of Consumer Reports. “This new rule is a key component of the health reform law designed to help rein in ever-increasing premiums. We can see it starting to work right here in Texas.”

Created as part of the Affordable Care Act, better known as the healthcare reform law, this new rule requires insurers to spend at least 80% of premiums on actual medical care. Failure to do so means carriers will have to send out rebate checks or reduce premiums.

“Lower premiums are a welcome sight for small businesses and Texans who buy coverage on their own outside of a major employer,” said Hutson.

According to financial statements from the parent company of Blue Cross Blue Shield, the insurer set aside $88 million for forthcoming rebates. In 2010, BCBS spent on average just 69% of premiums on actual healthcare for individual policyholders.

TDI’s request to delay the new 80% standard was denied earlier this year. Insurers must announce by June 1 how much of premiums were actually spent on medical care and rebates must be issued by August 1.