Sen. Rockefeller casts 'a watchful eye' on insurers' accounting practices

Dow Jones Newswires/ NASDAQ: "A report released Thursday by the chairman of the U.S. Senate Commerce, Science and Transportation Committee cautioned against health insurers using 'creative accounting' to meet new requirements for the amount of premium dollars they spend on patient care." The requirement is that insurers spend 80 percent of the premiums they collect on patient care for small group and individual plans, and 85 percent for large group plans (Brin, 4/15).

The Wall Street Journal Health Blog: Most major insurers currently spend less on medical care than the required percentage, according to the report. "After combing through the numbers insurers file to states, the committee determined that what many of the companies spending on medical care last year didn't meet the new thresholds. For plans sold to individuals in 2009, Aetna's MLR was 75.5% while Humana's stood at 68.1%, UnitedHealth Group at 70.5% and WellPoint at 74.9%. Aetna said the numbers Rockefeller listed in his report appear to be accurate, but that the company was reviewing them because they are a compilation of statuatory filings. UnitedHealth said its system wide MLR was 84% last year." WellPoint said it would work with federal and industry officials to meet the requirements of the new law. The committee that released the report is chaired by Sen. John Rockefeller, D-W.Va. (Johnson, 4/15).

Reuters: According to the report, "The insurance industry is beginning to consider the financial impact of the new federally required (medical) loss ratio requirements, including questionable changes in their accounting practice." One example the report notes is that insurer WellPoint "has already 'reclassified' more than half a billion dollars of administrative expenses as medical expenses" (Heavey, 4/16).

Bloomberg BusinessWeek: Rockefeller said, "Consumers can rest assured that our watchful eye will require health insurance companies to comply with the law by actually spending more money on patient care -- not doing all they can to cut corners and cook the books." But, insurers, including WellPoint are arguing that investments in wellness initiatives, health information technology, and other patient-oriented programs, should not counted as administrative expenses, as they are now, when the new requirement takes affect (Armstrong, 4/15).

Indianapolis Star: "Many insurers include only customer claims in their current ratios. They want to keep the number low to impress investors, said Sandy Praeger, of the National Association of Insurance Commissioners." Firms are still awaiting details from the administration on what should be counted towards the threshold. Though different insurers include different line items now, they will have to use the same standards beginning next year (4/16).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.