Japan expat health insurance update: US HHS issues new regulations.

A few of you may remember the post I did about how minimed and expatriate insurance plans underwritten by American companies may be facing some new pressures as a result of the new Affordable Care Act, a/k/a “Obamacare”.

Here and here, if you missed it.

The gist was that health insurance companies are going to be required, effective 1/1/11, to pay out either 80% or 85% of premiums on health care costs (the “medical loss ratio” or MLR), subject to some exceptions. Meaning, when all the algebra is done, administrative and profits are going to have to come out of the remaining 20%. If the firm doesn’t have those kind of medical expenses, it is supposed to refund the excess in premiums back to the policyholders—not keep them as additional profit.

Well, it looks like Health and Human Services has finalized some of the initial regulations. Here’s what they had to say about minimed and expatriate plans:

Mini-Med and Expatriate Plans. In order to address the special circumstances of mini-med and expatriate plans, HHS will apply a methodological adjustment to the way the medical loss ratio is calculated for those plans. The methodological adjustment will address the unusual expense and premium structures of mini-med and expatriate plans, and enable their issuers to apply for an adjustment to reported medical claims and quality improvement expenses. Because limited data are available to inform such an adjustment, this regulation requires accelerated reporting by issuers of mini-med and expatriate plans so that HHS may receive and review data on their expense structures and profitability. These changes to the methodology for reporting and rebates apply only in calendar year 2011, and as noted above, such plans are required to provide early reporting to the Secretary if they claim such an adjustment. To improve transparency and ensure consumers are aware of the product they are purchasing, HHS will require insurers that sell mini-med policies to provide prominent notice regarding the benefits and coverage provided by the policy.

Huh? Well, from the sound of it, HHS is giving the expat and gap insurers more wiggle room in terms of what they have to calculate as a medical loss ratio. But, the Department is also requiring these insurers to report a lot more information about what they actually spend on health care (versus administrative and profit) to the government. So maybe meaning no big change for 2011, but a much tougher regime for the gap and expat insurers in 2012, once they’ve ponied up 2011 numbers.

My own feeling is that people who are using expat plans in Japan, instead of the National Health Insurance, are going to get some rude awakening over the next few years that the American-based plans won’t want to do business with them anymore. This will be because that 20% administrative and profit cap just won’t be enough to make the effort worth it.

This is another reason why you should sign up for National Health Insurance in Japan. Why risk being dropped from coverage (that you weren’t supposed to be on in the first place), when the rules tighten for your friendly gap or expat insurer?