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Tax exemption in compromise a bright spot for insurers

Wall Street Journal, December 21, 2009

A compromise on the healthcare overhaul that the Senate reached this weekend offered some relief for insurance companies, specifically for nonprofits that could win exemption from a new $6.7 billion tax. Part of the deal was an exemption for nonprofit insurance companies that met several requirements. One way to qualify is to spend an average of 92% of premiums on healthcare expenses. That spending measure, called a company's medical-loss ratio, is closely watched to determine how much insurers take in profits. Few companies, though, would qualify for that exemption. Goldman Sachs analyst Matt Borsch says just four insurers reached that threshold in 2008. America's Health Insurance Plans, the industry trade group, said federal data show that plans on average spend 87% of premiums on care.