Wall Street Journal digs a bit into the medical loss ratio issue in health care, specifically which taxes should be excluded from premium.
Under Obamacare, small plans must post an 80% loss ratio or higher, and large plans must post 85% or higher, or rebate premium back to customers. And loss ratio is losses divided by premium, so removing taxes from premium makes the denominator lower and the loss ratio higher. Insurers want the calculation to generate a high number, minimizing the chance of a low loss ratio and hence a rebate.
The legislation said federal and state income taxes should be excluded but wasn’t clear on which ones. Some legislators want to exclude only taxes imposed by the legislation – that would be the “Cadillac tax” on expensive plans. Insurers, obviously, want a much broader definition. So far the NAIC is leaning toward excluding most federal income taxes, except those paid on investment income and capital gains.