Importance of Medicine

NEW REPORT: Insurers May Re-Label Administrative Costs As Medical Care To Meet Health Reform’s Requirements

The new federal health care law requires that insurers spend at least 80% of customers’ premiums on medical care in the individual insurance market, and 85% in the employer/group market. Starting in 2011, insurers that don’t meet these requirements will have to issue rebates to consumers “based on the amount insurers’ spending falls below these minimums.” Yesterday, a new report released by the Senate Committee on Commerce Science and Transportation found that while many of the nation’s largest insurers “modestly increased the percentage of premium dollars they spent on medical care in 2009,” the disparities “in medical spending between market segments remained larger than ever.

Health insures, in other words, still view the individual and small group markets as their most profitable sectors and they continue to spend a smaller percentage of premium dollars on actual medical care — shifting a significant amount towards administrative expenses and profits. For example, while the largest insurers used about 15 cents out of every premium dollar for administrative expenses in the large group market, “they used more than 26 cents out of every individual premium dollar for administrative expenses,” the report notes. [Note: the original report says "medical expenses" rather than "administrative expenses." I contacted the staff and they said that this was a mistake.]

Some insurers are already meeting the new federal requirements, while others will have to spend more on medical care to comply with the law:

The analysis found that the largest for-profit health insurers spend a lower percentage of their customers’ premium dollars on patient care than other health insurers. The analysis also found that in the individual and small group markets, health insurers spend a significantly smaller portion of each premium dollar on medical care than they do in the large group market.

Look:

The problem will come when insurers that fall short, try to meet the new minimums. The ratio is closely monitored by Wall Street investors and so insurers will have every incentive to continue spending less on care and increasing profits. They may try to artificially inflate their MLR by reclassifying administrative costs as ‘medical care.’ Already, WellPoint — the nation’s largest insurance company — announced that it has reclassified some of its administrative costs as medical spending in order to increase its medical loss ratio. As the report notes, “By reclassifying these expenses as medical benefits, the executives projected that WellPoint’s 2010 medical loss ratio (which the company calls its “benefit expense ratio”) would increase by 170 basis points, or 1.7%. Because WellPoint expects to collect more than $30 billion in premiums from its commercial health care customers in 2010, this “accounting reclassification” means that the company has converted more than a half a billion dollars of this year’s administrative expenses into medical expenses.”

Health and Human Services Secretary Kathleen Sebelius has written a letter to the National Association of Insurance Commissioners (NAIC) requesting their assistance in defining medical loss ratio (MLR) standards in the new health care law and has issued two formal requests for public comment on how best to define the term. Since the MLR requirements are one of the few ways to prevent insurers from earning outrageous profits before most of reform’s provisions kick in, HHS “and state insurance commissioners will have to remain vigilant and focused on ensuring that consumers get the benefit of the new federally mandated medical loss ratios.” These definitions, in other words, have to be air tight to ensure that companies can’t simply reclassify their expenses.

After returning home from being in Haiti during the aftermath of the January 12th earthquake, I had to have a minor surgical procedure done to remove pins from my small finger. As the nurse was prepping me for surgery, I suddenly began to sob uncontrollably as images of what I'd just witnessed in Haiti flooded my mind.

Two things hit me in that moment: 1) the thousands of Haitians that suffered life-threatening injuries did not get near the level of treatment that I was getting for a broken finger and 2) how difficult it must be for U.S. doctors serving in Haiti to be unable to treat their patients with the standard of care they are accustomed to in the U.S. healthcare system.

I went to Haiti with MedShare two weeks after the earthquake to capture the medical situation, and learn how MedShare can help improve the quality of healthcare in Haiti through providing medical supplies and equipment. MedShare is a national nonprofit organization that recovers and redistributes surplus medical supplies from U.S. hospitals and medical companies to those in need. They immediately responded to the dire need for medical supplies in Haiti following the earthquake and since then have shipped over 75 tons of requested supplies.

During my time in Haiti, I visited hospitals and clinics throughout Port-au-Prince, interviewing patients, volunteer nurses and doctors, Haitian medical practitioners and hospital administrators. One of the things I learned from many of the Haitians I spoke with is that Haiti is not that different now than it was before the earthquake. The earthquake has only added to and exemplified the needs that have existed in Haiti for years, healthcare being one of them.

The USNS Comfort may have picked up its anchors, but the health needs are still exponential. Hospital triage lines are still hundreds of people long. Many Haitians are flocking to the hospitals seeking treatment for serious medical conditions that existed before the earthquake. Until the earthquake happened and humanitarian workers rushed in, most Haitians could not afford medical treatment. Doctors are not treating as many earthquake trauma injuries, but the various medical problems they are seeing are still a result of the earthquake.

There have been billions of dollars committed by the UN and various NGOs to the rebuilding of Haiti, and healthcare must remain a top priority. The rainy season has arrived, and with millions living in unsanitary conditions, bacterial infections and diseases are being born. Without quality healthcare, the Haitian people will die of treatable illnesses, such as pneumonia, cholera, malaria and diarrhea. It would be a great injustice to see another wave of preventable deaths occur.



However, no matter how much money invested, there also must be strong leadership in Haiti to successfully rebuild a sustainable healthcare system. MedShare has identified several hospitals that have the leadership and operational capacity to provide quality healthcare, if only provided the adequate resources. They identify and forecast their medical needs and develop solutions, and MedShare works with them to implement those needs.

As thousands of governments, organizations and people around the world unite to rebuild Haiti, we must strive to build a quality healthcare system to give the people the medical treatment they deserve, and prevent any more unnecessary deaths.

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