Fulfilling one of its primary mandates under the Patient Protection and Affordable Care Act (PPACA), the National Association of Insurance Commissioners (NAIC) has voted to adopt a model regulation containing the definitions and methodologies for calculating medical loss ratios.
When the PPACA signed into law on March 23, 2010, one of the stipulations was that beginning in 2011, insurance companies meet new medical loss ratio requirements designed to ensure a large percentage of premium dollars go to health care. The PPACA required that the NAIC provide recommendations for the definitions and calculations of these ratios to Department of Health and Human Services (HHS) Secretary Kathleen Sebelius by the end of the year. Henceforth, the NAIC proposal is likely to define what counts as medical spending and what counts as administrative expenses going forward.
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