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Report: Some Insurers Might Be Misconstruing Amount Spent on Care

In 2009, some of the largest U.S. health insurers adjusted their accounting practices in an attempt to circumvent a requirement under the new health reform law that stipulates the amount they must spend on medical care, according to a report released on Thursday by the Senate Commerce, Science and Transportation Committee, Reuters reports.

Under the overhaul, large health plans beginning on Jan. 1, 2011, will be required to spend at least 85% of every premium dollar on medical care, rather than administrative costs or profits. Individual and small group health plans' medical-loss ratio must be at least 80%.

The new law would require insurers to pay a rebate to customers if their MLRs dropped under the new limits.

Report Details

According to the committee's report, a review of insurers' 2009 expense reports found that companies in some markets spent, on average, 74 cents per premium dollar on medical care.

Committee Chair John Rockefeller (D-W.Va.) said in a statement, "This new data makes clear that too many health insurance companies are still putting profits before people, and they have a lot of work to do to meet the consumer protection requirements of the health care reform law by the end of this year" (Heavey, Reuters, 4/15).

The committee also noted that WellPoint recently reclassified certain expenses, including nurse hotlines and wellness programs, as "medical." Such items previously had been classified as "administrative."

The report suggested that insurers avoid attempting to adjust their accounting practices to make it appear as if they are complying with the law.

Clarifications in the Works

The National Association of Insurance Commissioners is working on a set of definitions for what insurers can count as medical costs versus administrative costs.

Many insurers are waiting for further instructions from regulators before reclassifying their expenses, the Wall Street Journal's "Health Blog" reports (Johnson, "Health Blog," Wall Street Journal, 4/15).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
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