Insurance and WellPoint and Health Care Reform and Health Insurance and Health Care & Life Sciences and Health Care & Insurance

Rockefeller: Insurers don't spend enough on medical care

April 15, 2010

Insurance companies including WellPoint Inc. and Aetna Inc. don’t provide consumers the benefits they paid for, which is why the industry needs close supervision, U.S. Senator Jay Rockefeller said Thursday.

Many insurers spent less revenue from premiums on medical care than is called for under the health overhaul passed last month, according to a report released by Rockefeller’s office. The legislation requires insurance companies to spend at least 85 percent of the premium revenue for large group insurance on medical care, and 80 percent of the revenue for individual and small group insurance.

While individual insurers now decide what categories to include in the ratio, the health law demands that all companies classify medical costs the same way beginning in 2011. What will be included under the ratio is being developed by Health and Human Services Secretary Kathleen Sebelius, with the input of state insurance commissioners.

Only Cigna Corp. among the six largest U.S. insurers met the 80 percent threshold for the individual market in 2009, according to the report. Aetna spent 76 percent of premiums on medical care, while Humana Inc. spent 68 percent. The data in the report is from the Kansas City, Mo.-based National Association of Insurance Commissioners, which regulates insurance companies at the state level.

Indianapolis-based WellPoint “reclassified” more than half a billion dollars of administrative expenses as medical expenses when it was defining its medical-loss ratio, Rockefeller’s report said. In March, the company announced it would consider nurse call-in centers and wellness programs to be medical costs.

“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,” Rockefeller, a West Virginia Democrat who is chairman of the Senate’s commerce committee, said in a statement.

WellPoint spokeswoman Kristin Binns said the company plans to expand disease-management programs, wellness initiatives and other items that are not counted as part of medical expenses by other insurers.

“We share the senator’s commitment to ensuring that the maximum resources possible are devoted to health coverage, disease management, wellness and other programs designed to improve our members’ health and medical,” Binns said in an e- mail.

Rockefeller’s report comes after America’s Health Insurance Plans, a Washington-based lobbyist for 1,300 insurers, and the Chicago-based Blue Cross and Blue Shield Association, with 39 members, said they are negotiating with the state insurance commissioners group over how to define what medical costs should be included.

Insurance industry lobbyists said they were pushing for the inclusion of technology expenses, wellness programs and pay-for-performance under the threshold. Many companies now include only medical claims under the heading.

Cigna Chief Executive Officer David Cordani said in an interview that he was confident the Obama administration will allow insurers to count spending on nurses who advise customers as a medical expense. Sebelius and congressional staff indicated a willingness to do so in conversations over the past six weeks, he said.

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