Healthcare/Insurance: New US and European Health Care and Insurance Overhaul Programs To Benefit Consumers

Under the health-care overhaul program in the US, insurers, as of this year, must spend at least 80 percent of the premium dollars they collect on medical claims or quality improvement efforts. Administrative expenses and profits are limited to 20 percent or less of what they collect. Those that don't meet these new "medical loss ratio" standards have to refund the extra premiums collected to consumers. Insurers at present consider medical claims paid as losses.

In Europe the EU's internal market commissioner and policymaker Michael Barnier has responded to the criticism from insurance companies that the new EU capital rules are bad for the Insurance industry. Barnier said that the changes are necessary to protect policyholders and improve an outdated regime.

Mr. Barnier has also told four leading insurance industry bodies that “criticisms levied against the EU Solvency II directive, particularly that calibrations are too high, have not been confirmed by evidence”

In Europe the new rules are due to come into force in 2013 and are supposed to better match insurers’ capital with the risks they take. Mr Barnier also pointed out that tests have shown that the industry overall has a buffer of €360bn more than the new regime’s capital targets and €676bn more than the required minimum capital – a level which, he says, exceeds the margin under the current regime.

In general consumer advocacy groups in the US and Europe are pleased with the new laws coming into effect to tighten the screws on the Insurance Industry. Some, however feel that these laws do not go far enough.

EU-Digest

Cartoon insert: Dave Granlund cartoons