New medical loss ratio regulations make the insurance marketplace more transparent and require insurers to spend premium dollars on care, according to a statement from the U.S. Department of Health and Human Services.

The regulations issued by the department require health insurers to spend 80 to 85 percent of insurance premiums on direct care for patients and efforts to improve care quality.

This “medical loss ratio” provision of the healthcare reform law passed after bitter congressional debate, will make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money, the HHS statement said.

“Thanks to the Affordable Care Act, millions of Americans will get better value for their health insurance premium dollar,” HHS Secretary Kathleen Sebelius said in the statement.  “These new rules are an important step to hold insurance companies accountable and increase value for consumers.”

According to the department, many insurance companies have been spending a “substantial” part of premium dollars on administrative costs and profits, including executive salaries, overhead and marketing. Starting in 2011, if they do not spend 80 to 85 percent on medical care and health care quality improvement, rather than on administrative costs, they will be required to provide a rebate to their customers starting in 2012.

In 2011, the new rules will cover up to 74.8 million insured Americans and up to 9 million could be eligible for rebates worth up to $1.4 billion.  Average rebates per person could total $164 in the individual market, the statement said.

The law now requires that, beginning in 2011,  insurance companies must publicly report how they spend premium dollars.

“These rules were carefully developed through a transparent and fair process with significant input from the public, the states, and other key stakeholders,” Jay Angoff, director of the Office of Consumer Information and Insurance Oversight at HHS, said in the statement.  “As we build a bridge to 2014, when better, more affordable options are available to consumers, these rules will help make health insurance fairer for consumers now.”