By Mike Lillis - 08/13/10 01:00 PM EDT
Consumer groups this week are asking the White House to take a closer look at the pay policies of private insurance companies, which in recent months have cut medical spending even as premiums have skyrocketed.
"In recent quarterly financial reports, all of the seven largest for-profit health insurers have reported healthy profits and reductions in the proportion of premium dollars spent on medical care," Consumer Watchdog and the Center for Media and Democracy wrote Wednesday to Health and Human Services (HHS) Secretary Kathleen Sebelius.
The companies, the groups say, "appear to be cutting the proportion of premium dollars spent on medical care … in advance of regulations intended to make them spend a higher proportion on care, and less on administrative bloat."
The behavior, the groups added, "looks suspiciously like that of credit card companies, which spiked annual interest rates in advance of consumer protection laws intended to restrict the conditions under which rates could go up."
The Democrats' new health reform law includes a provision forcing private insurers to spend between 80 and 85 percent of premium payments directly on medical care (in lieu of advertising, salaries, dividends and other corporate costs). The figure is known as the medical loss ratio (MLR) — "a telling description," the groups write, "of how providing healthcare is regarded by Wall Street."
Indeed, private insurers are fighting tooth and nail to have HHS broaden what expenses qualify as medical services for the purpose of determining MLRs. Insurers, for instance, are lobbying to have all state and federal taxes deducted from premium revenue — a trend leading top Democrats this week to clarify that only "federal taxes and fees that relate specifically to revenue derived from [healthcare reform]" should qualify as deductible.
Consumer Watchdog and the Center for Media and Democracy are urging HHS to tighten its definition of MLR to ensure that only true medical services are included in the calculation.