Today, Consumers Union urged federal officials to reject the state of Florida’s request to dramatically water down new consumer protections provided under the health reform law.  If granted, the state’s request would mean the loss of an estimated $144 million in health insurance refunds to consumers over the next three years.

As we’ve explained before, the Affordable Care Act now requires health insurance companies to use no more than 20 percent of your premium dollars on profits and administrative expenses, like marketing, paperwork, and CEO salaries.  Spend more than that, and insurers must refund you the difference.  The rule, known as the medical loss ratio rule, went into effect in January 2011, with the first refunds expected in mid-2012.  Already, we’ve seen the rule starting to curb those double-digit rate hikes that consumers have suffered with for years.

The health reform law allows states to apply to delay the rule for people who purchase coverage on their own in the individual market.  A delay is primarily for states that can show that the new rule is likely to cause some insurers to stop selling individual market policies instead of paying refunds, resulting in a market with very few competitors.

But this isn’t the case in Florida, which has at least 20 insurance companies selling individual market policies.  The Florida Office of Insurance Regulation wants to phase in the new rule, so the 20 percent limit wouldn’t apply until 2014.  Consumers wouldn’t get the rebates they have coming to them in the next few years, and insurers wouldn’t have the incentive to rein in bureaucratic expenses and profits.

Florida’s proposal would benefit insurers such as Golden Rule, part of the UnitedHealth Group, which in Florida pays out about 68 cents for medical care for every premium dollar it takes in on individual market policies, with a reported 12% profit margin.  If the rule were in full effect, Golden Rule would owe its customers about $33 million next year alone; under Florida’s proposal, it would pay no rebates at all during the next three years.

Consumers need more value for the premium dollars now.  Absent extreme circumstances, states should not delay the rule’s benefits for individual market consumers.  We’ve urged the Department of Health and Human Services to reject Florida’s proposal, and give consumers back the money they are owed.  Read our comments here.