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Health Insurance Medical Loss Ratios – How Will The Definitions Between Healthcare, Other Administrative Costs and Profits

Posted Apr 16 2010 12:26am

In California this has been an ongoing battle for years with trying to ensure that medical premium money paid actually goes to spending on healthcare, but where will image the lines be crossed here?  I think we would all like to agree on what is “healthcare” expense and perhaps not include additional areas like Venture Capital investments and even some software that is not directly related to healthcare included in perhaps some “gray areas” that may lead up to further and additional stagnating discussions that could cause delay.  Here’s a potential example with the Blue Cross Venture Capital division that invested in the “free” tablets provided to doctors to use in their lobbies to help them streamline input and is also funded by ads that run on the units.  Is this money directly going to “healthcare” or is it administrative and it could also fall over into the “profit” area with stated “VC” funds.

How does wellness fit into the scheme?  It’s not actual money paid out on claims but as you can see we have devices and software now coming of age that are incorporating their way into healthcare and telehealth.  Is this healthcare or administrative costs that help keep claims down?  Certainly through some efforts we do end up getting more involved as patients which we should be doing anyway, but when it comes down to putting these types of expenses in a data base and assigning a category, where do they go? 

Last year I actually asked this question on a post about being insured with United.  We hear and see a lot about their technology investments and they make more money these days from investments in technology and have subsidiaries that handle the algorithms and formulas used by the claims processing and wellness side of the business.  United invested hundred of millions with Cisco last year with technology.

I’m not saying that investing in technology is bad, I’m asking how do you commit to creating the black and white lines as to “what are healthcare expenses” and what is allowed in the 85% area?  I think we will be hearing some long discussion in this area in the upcoming months.

Is using Quicken Health to track and figure out your healthcare bills medical or administrative?

  UnitedHealthcare To Offer Quicken Health Expense Tracker to 700,000 Employer Health Plan Enrollees

In healthcare technology and payment are crossing over and intertwining in areas that we have not seen before due to new technology too, so again, I am just curious to see how this all gets spelled out.  Again I think an algorithmic formula that helps determine some of this could be helpful rather than just a guess so there is a calculation on what is considered actual “healthcare” – it’s getting complicated. On the software side I think you would definitely determine the patient value and benefit coming first too before profit as it can be both and not only software to benefit the payer only.  With billing software as an example it’s been clearly stated many times that the payers are the bottom line beneficiaries here, not the providers sending the data.  BD 

Most of the big publicly traded insurance companies spend less on medical care than the new health law will require of them, says a report issued today by the Senate Commerce Committee.

The committee, chaired by West Virginia’s John D. Rockefeller IV, has spent almost a year digesting data on each insurer’s medical-loss ratio, a metric closely watch by state regulators and Wall Street of how much health plans spend on benefits versus administrative expenses and profits. Starting next year under the new health law, insurance companies will need to spend 80% of premiums collected from individual and small-group plans on medical care and 85% of premiums from plans sold to large groups on care.

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%.

The committee also drew attention to WellPoint’s decision, described here last month, to reclassify some expenses as “medical” that it had reported as “administrative” earlier this year. Reclassifying the expenses, which include nurse hotlines and wellness programs, can make it easier for insurers to reach the minimum MLR thresholds.

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