Most insurers met spending limits under law: GAO

(Reuters) - Most U.S. health insurers last year would have satisfied the much-disputed spending rules under President Barack Obama's healthcare reform, according to a new report by a congressional watchdog agency.

The rules require insurers such as Aetna and UnitedHealth to spend most of customers' premium payments on medical care, not administrative costs or profit, or risk paying patients a rebate.

Since the requirement went into effect in January, a number of states have sought waivers to get leeway in how fast the rules go into effect, which they say would keep insurers from abandoning the individual insurance market.

On Monday, health authorities rejected Louisiana and Indiana's requests.

The rest of the insurance community continues to grumble about the rules, which they have said could force companies to desert some small-group and other niche markets, limiting options for consumers.

In a report posted online on Wednesday, the Government Accountability Office looked at the insurance plans in 2010, before the new rules took effect, and found that at least 64 percent of eligible insurers would comply with the spending rates.

Insurers use such spending rates, known as medical loss ratios or MLRs, to set monthly premium rates. In the past, when insurers spent fewer premium dollars on medical care, investors could see a possible profit boost. But starting from this year, that potential profit turns into a consumer rebate.

Seventy-seven percent of insurers in the large group market and 70 percent of small group insurers would have met or exceeded the new standards, the GAO found.

The percentage for the individual market was quite a bit lower at 43 percent. The GAO said insurers in this market had higher expenses for brokers' commissions and fees than those in other markets. Brokers can help guide consumers to individual plans.

The large and small group markets covered 85 percent of insured Americans in 2010, while the individual market covered 15 percent, according to the GAO report dated October 31.

See the report here

Under the healthcare law, large group health insurance plans must allocate at least 85 cents for each dollar they get from premiums to medical care. Plans for individuals or small groups must spend 80 cents per dollar.

(Reporting by Alina Selyukh and Anna Yukhananov in Washington)