In a rebuff to insurance agents who pleaded that their commissions should not be included in the administrative expense ratio of health insurance policies, the Department of Health and Human Services (HHS) on Friday (Dec. 3, 2011) issued final regulations locking in stone the 80/20 ration envisioned by the Patient Protection and Affordable Care Act (PPACA).

Instead of excluding them, the HHS final rule includes broker commissions as administrative expenses and allows just 20 percent of health insurance premiums to cover administrative charges; the other 80 percent must go to health care expenses. Thus comes about what is called the 80/20 medical loss ratio (MLR).

"If your insurance company doesn't spend enough of your premium dollars on medical care or quality improvement this year, they'll have to give you rebates next year," said Centers for Medicare and Medicaid Services Acting Administrator Marilyn Tavenner in a press release. "This will bring costs down and give insurance companies the incentive to focus on what matters for patients – high quality health care."

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