On September 23, several changes to Texas health insurance plans went into effect.  The changes influence everything from maximum payout policies to preexisting condition policies to eligibility requirements, but perhaps the most important amendment to our health care system is the government’s mandate for how insurers must calculate their “medical loss ratios.”

Medical loss ratios are calculated by taking the amount an insurer spends on the health care of its customers, and dividing by the amount an insurer collects in premiums.  The new health care law mandates that individual and small business insurance plans must spend at least 80 percent of their collected premiums on health care, while large employer plans (defined as just 50 or more employees) must spend at least 85 percent of premiums on health care.  On the surface, it may sound consumer friendly, but once you dig into the details, the implications are frightening.

First, how does the government discern funds used for health care versus funds used for other purposes?  If protecting consumers against fraud and working with doctors to assure smooth alignment of medical records is considered administrative and not an “activity that improves health care quality,” then insurers will have to eat those costs (unlikely), pass them onto consumers (likely) or stop the activities altogether (also likely).

Certain states are already pleading with the federal government to waive or delay the medical loss ratio rules, but the law’s language gives regulators little flexibility in waiving the MLR requirements, which must be in effect by January 1, 2011.

Such guidelines put affordable Texas health insurance plans in jeopardy, as insurers have only a few months to cut large portions of their budget.  An insurers’ first goal should be patient protection, but many patient-oriented activities are in danger of being scrapped to account for the government-imposed MLR requirements.  And adding to the confusion, the status of Texas health savings accounts is unknown, as the National Association of Insurance Commissioners ignored HSAs when drafting the guidelines.

We’ve known for awhile now that big changes are looming for health insurance.  Some just went into effect, and more are on the way.  Let’s hope that once the dust settles, affordable Texas health insurance is still an option for us all.

As Obama’s health insurance legislation continues to roll out, we’ve seen Texas health insurance companies close and other insurers drop coverage they could no longer afford to offer.  Federal health care reform isn’t just affecting Texas health insurance plans, of course, as negative reactions are taking place all across the country.

Last week President Obama was in Iowa to espouse his administration’s policies, including the increasingly unpopular health care law.  As we’ve been hearing since before the legislation went into effect, Obama reiterated that individuals won’t have to change their insurance plan if they like the one they’ve got.  In fact, according to Virginia Right, Obama said, “There’s nothing in the bill that says you have to change the health insurance that you’ve got right now…If you’ve got health care through your employer, that’s not going to change, except to make it a little bit safer and more secure.”

But The New York Times reported last week that The Principal Financial Group, an Iowa-based company that provides coverage to about 840,000 people, announced that it planned to stop selling health insurance.  This is yet another sign of the backlash and upheaval emerging among insurers as the new federal health law starts to take effect.

So despite the President assuring Iowans that they can keep the health insurance they currently have, 840,000 people in that state won’t be able to keep their plan.  This isn’t just happening in Iowa or Texas; it’s happening all over the country, as insurers find ObamaCare’s strict regulations too imposing to meet.

Congressional Republicans proposed some alternatives to ObamaCare, but for now, at least, we’re in the middle of it.  Several reforms have already gone into effect, while many more will roll out over the next several years. We’ll keep watching and waiting to see how the monumental legislation will affect peoples’ ability to get affordable health insurance in Texas and other states across the nation.