Enforce: The Insurance Policy Enforcement Journal vol 12 | issue 1 Enforce vol 12 | issue 1 | Page 4

• C OV E R S T ORY • Use the Affordable Care Act as a Sword at Renewal Time Or . . . Your Insurance Company Will Use It Against You By Rhonda D. Orin and Daniel J. Healy M ost recent articles about the Patient Protection and Affordable Care Act concern the postponement of employer mandates and the failures of healthcare.gov. The media hype has led many employers to shift their focus away from health care law issues until 2015. But savvy employers are not ignoring the law. They know that many of the law’s provisions already affect their bottom line and, if used correctly, the statute can be helpful. Roughly speaking, three general groups are subject to Affordable Care Act requirements: employers, individuals and insurance companies. Many provisions applicable to insurance companies have a ripple effect, in that provisions enacted for the purpose of limiting insurance companies’ ability to charge excess premiums are being manipulated to increase premiums instead. A common refrain from health insurers at renewal time is that due to the health care law, premiums must go up. What is notable, however, is that health insurance companies have been flourishing since the act was passed. Ten of them, for example, were in the Fortu ne 500 for 2013, and eight of them improved their rankings from 2012. It may be useful to keep this fact in mind when they cry poor at renewal time. 4 Enforce: The Insurance Policy Enforcement Journal It is increasingly common for insurance companies to use the Affordable Care Act to increase premiums while — ironically — blaming the law for the premium increases. By paying attention to the five tips below the informed employer can avoid falling prey to such tactics. 1. Fun and Games with the Medical Loss Ratio Most renewals start when brokers provide employers with a worksheet reporting on their claims experience in the current year, and documenting (supposedly) the need for a substantial premium increase. One of the key numbers on that relatively indecipherable spreadsheet is a percentage called the medical loss ratio. It is supposed to designate the ratio between the premium dollars spent on health care and the premium dollars that go to the insurance company’s administrative costs and bottom line. Its intent is policyholderfavorable: to keep premiums in line with costs. Large plans are required by the Affordable Care Act to have a medical loss ratio of at least 85%. That means at least 85% of premiums must be spent on actual health care costs. If that threshold is not met on the group level (e.g., if only 75% was spent on