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A3972/S2875 - Makes Changes to Calculation of Minimum Loss Ratio Requirements

March 21, 2024

A.3972, sponsored by Assemblyman Roy Freiman (Middlesex), Mitchelle Drulis (Somerset), and Shanique Speight (Essex), makes certain changes to calculation of minimum loss ratio requirements for health benefits plans in individual and small employer markets. VIEW

Identical Legislation:
S2875, sponsored by Senator Nellie Pou (Bergen and Passaic). VIEW

NJDA Statement: The NJDA supports this legislation, which updates the Medical Loss Ratio (MLR) requirements for New Jersey’s individual and Small Group health insurance markets.  The Association is seeking amendments to the bill that make clear that these new MLR standards also apply dental plans.  This bill clarifies and standardizes MLR will be calculated at an 80/20 ratio, meaning 80 percent of premium dollars collected by a health benefits plan must be used to pay claims or for quality improvement, while only 20 percent may be used for the carrier’s administrative costs, including executive compensation. Under the legislation, the calculation of a health benefits plan’s minimum loss ratio must be assessed based on a three-year rolling average of costs. This is consistent with other states’ marketplaces.  New Jersey has long-established laws in place regarding medical loss ratio for various dental plans.  However, the application and enforcement of these laws, including public transparency, has been lacking by the NJ Department of Banking and Insurance, which licenses and regulates insurance carriers.   The association’s intention by seeking amendments is to give clear guidance to the Department regarding the application of MLR to dental plans written in this state to adequately protect the public’s interest and make the entire healthcare marketplace consistent among various insurance lines.

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