ACT RELATIVE TO PROMOTING THE EFFICIENT USE OF HEALTH CARE REVENUES (S.593)

LEAD SPONSOR: SENATOR PATRICIA JEHLEN

Summary of Proposed Law:

• Would require all insurers to devote at least 90% of their total annual Massachusetts-associated revenues on health services for its policyholders.  This percentage is referred to as an organization’s “care share.”
• Insurers would be prohibited from spending more than 10% of premium revenues on non-health expenditures, with the exception of small or out-of-state companies, so long as they maintain stable operating budgets in Massachusetts.
• Insurers who have been established in the Commonwealth for more than one year and insure between 25,000 and 50,000 individuals would have a minimum care share of 85%.
• Care share standards would not apply to insurers who have operated for less than one year in Massachusetts and those insuring fewer than 25,000 individuals.
• Insurers conducting business in other states as well as in Massachusetts would only be subject to this law in proportion to its Massachusetts revenues.

Role of the Insurance Commissioner in Enforcement:

• Organizations would be required to submit financial reports to the commissioner of Insurance to demonstrate compliance with the expenditure standards.
• Both the Commissioner and insurers would publish care share percentages expended the preceding year to allow the public to compare organizations.

Penalties for Violation:

• Insurers failing to comply with their cost share on member health services would be seen as charging exorbitant premiums and would be forced to return the difference between cost share and premiums charged to the insured.
• Violation of the proposed law would be subject to a fine of up to 40% of the insurer’s Massachusetts-associated revenues; insurers would also be subject to the consumer fraud statute.

For further information, contact Megan Shannon in Senator Jehlen’s office at (617) 722-1578; to get involved in supporting efforts to regulate health insurance overhead, contact Mass-Care.