Tuesday, June 3, 2008

California Inflates Loss Ratio

By Merrill Matthews, Jr.

Categories: California, Insurance Regulation

California Sen. Shelia Keuhl (D), a staunch single-payer proponent, has succeeded in passing SB 1440 through the state senate. The bill would require all health insurers to spend 85 percent of all premiums on patient care. Proponents believe that this will lead to more affordable policies, but high loss ratios can actually lead to less-affordable policies.

The problem with artificially high loss ratios is that they undermine competition and encourage health insurers to offer only rich benefit plans. The National Association of Insurance Commissioners has actually proposed a much lower standard, around 55 percent for individual health insurance policies.