Legislation to increase medical loss ratios for insurers has “hit a wall,” due to negative reaction from the industry, says its sponsor.

The bill, HB 272, was part of a package of health insurance reform measures introduced in February by Maryland Insurance Commissioner Ralph S. Tyler and legislative leaders. The bill sought to increase medical loss ratios – the amount of each premium dollar spent on actual medical care costs – to 85% for small-group and 80% for individual group policies. The remaining percentage goes to administrative expenses, reserves and profits.

Heather R. Mizeur

The bill’s sponsor, Del. Heather R. Mizeur (D-Montgomery), told IFAwebnews.com that she is withdrawing the legislation for this session, but is not giving up on the matter through “a grassroots campaign.”

“We’ve hit a wall this session,” Mizeur said. “We made good progress to inform the public on the issue, especially the antiquated medical loss ratios in place and the need to increase them to get more money spent on actual medical care.”

Mizeur added that the bill “definitely would have passed in the House, but was blocked on the Senate side” due largely to the reaction of the state’s health insurance industry.

Industry response sways Senate

Mizeur said numerous members of the insurance industry “complained” about her proposal.

“I expected such a reaction, but what I didn’t expect was that the reaction would hold such sway in the Senate,” she said.

Jonathan Anders, chairman of the joint legislative committee for the Maryland Association of Health Underwriters and the Maryland chapter of the National Association of Insurance and Financial Advisors, said the groups “just want to be sure that carriers aren’t artificially constrained by unrealistic medical loss ratio requirements that prevent them – and brokers – from delivering the services our clients need.”

Mizeur’s bill would have raised the medical loss ratio insurers must maintain from 60% to 80% on individual policies and from 75% to 85% for small group policies. It also proposed increasing the ratio for Medicare supplement policies.

“Just because the bill is not moving forward doesn’t mean we won’t move on the issue,” she said.

Mizeur said she and Del. Peter A. Hammen (D-Baltimore City), the House Health and Government Operations Committee chairman, will send a letter to the Maryland Insurance Administration, calling for more information on medical loss ratio on the regulator’s website and details on how the ratio factors into rate reviews.

In a statement, the MIA said it “applauded” Mizeur and “still believes” the ratios need examination.

This story originally appeared in the April 2009 print edition of Insurance & Financial Advisor.