Obama Administration Reduces Premiums for High-Risk Insurance Plans

On July 1, the Obama administration reduced premiums for high-risk insurance plans by up to 40 percent in 17 states and the District of Columbia, according to an NPR report.

The administration encouraged other states to follow suit. According to the report, experts agreed that high prices for coverage created under healthcare reform could be linked to low enrollment in the plans. Hundreds of thousands of people were expected to enroll, but the number of enrollees had only reached 21,454 after several months.

The reductions were made possible by state-specific data that allows federal officials to tailor the premiums to the rates for individual plans in the state.

According to the report, some insurers are reducing premiums to meet new "medical loss ratio" requirements, which mandate that insurers must spend at least 80 percent of the premiums they collect on medical claims rather than administrative costs or profit. Insurers that do not spend 80 percent must pay rebates to consumers for the excess amount collected.

If insurers lower premiums in the individual market to meet medical loss ratio requirements, the high-risk insurance programs could benefit, as their rates are supposed to match the standard rates in a state's individual market.

Read the NPR report on high risk insurance plans.

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