Big Health Insurers Already Trying to Game Reform

by Admin on May 18, 2010 · 1 comment

in News, Payers

One of the provisions in the health care reform law passed in March says insurance companies must use 80% of the premiums they collect to provide actual health care– meaning, to pay claims. What a concept. Unfortunately, as the regulations for the legislation are being written in Washington, the same lobbyists who tried to stop the law completely are now trying to game it by affecting the definition of what constitutes paying a claim.

According to Forbes,

The legislation says that 80% of what’s collected by insurance companies must be spent to pay medical claims. This number is what’s known as a “medical loss ratio” or MLR. If the 80% MLR target is missed, rebates are to be given to the insured members. The problem is: what counts as a medical claim? What if you are running a program to encourage people to exercise? Could that be counted? What if the flu season is light this year but heavy the next? Should members get rebates in year one but the HMOs go broke in year two? (Yes, is probably the response from lawmakers.)

So the plans are trying to get all kinds of internal expenses counted as medical expenses, and hoping to obfuscate the reporting requirements, so when you shop for health insurance, you won’t be able to pick the plan that spends the most money on you, the customer.

Part of this is investor pressure. Investors want low medical loss ratios. If a company has to spend more than 80% of its revenue on you, the customer, otherwise known as the expense, it doesn’t look as profitable to investors. On the other hand, it is your premium dollar, and in theory you’re entitled to it.

Who will this impact the most? Individuals and small businesses, of course.

If you want to get really mad, you can download Sen. Jay Rockefeller’s letter to Secretary of Health and Human Services Kathleen Sibelius, in which he formally tries to explain this to her as she supervises the writing of the enforcement regulations, here. Rockefeller says consumers should be able to understand and shop for the plan with the most dollars spent on its members.

Forbes thinks that this will result in HMOs that look more like utilities, with highly regulated businesses that are closely scrutinized. And what, exactly, would be wrong with that?

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