Insurers Pressed About Use Of Premium Money For Non-Medical Expenses

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An analysis released in a letter by Sen. Jay Rockefeller, D-W.Va., suggests that the amount of money insurance companies spend to cover medical expenses could be less than the companies claim.

The New York Times reports: "The health insurance industry likes to cite figures showing that 87 cents of every dollar in premiums is spent on medical claims. But a new Senate analysis suggests that for-profit insurance companies are spending much less than that, especially for policies sold to individuals and small businesses. Instead, as little as 66 cents of each dollar paid in premiums goes toward doctor and hospital bills, while the rest covers administrative expenses, marketing and company profits, according to the analysis. .... The [health reform] legislation that may reach the House floor later this week would initially require insurers to spend at least 85 cents of every dollar in premiums on medical claims."

A long-standing complaint from individuals and small businesses is that they get less for their money. "But insurance companies generally do not disclose how much they spend in different segments of the market. The Senate analysis of the figures does not include information from California, because that state's filings are not available through the National Association of Insurance Commissioners. ... The insurance industry's trade group, America's Health Insurance Plans, said Monday that the 87-cent figure it cited as the industry average was based on information collected by the federal government and was an accurate reflection of how much of each dollar in premiums was spent on medical claims." (Abelson, 11/2).

Bloomberg reports: "The six largest for-profit insurers, including Cigna, UnitedHealth Group Inc. and WellPoint Inc., spent 74 percent of individual policyholders' premiums on health-care costs, Rockefeller, a West Virginia Democrat and chairman of the Commerce, Science and Transportation Committee, said in the letter sent today. Companies spent 80 percent of premiums they collected to treat members on small-business policies." As Congress continues work on health overhaul proposals that include about "$500 billion in subsidies proposed to help the uninsured buy policies, 'it is critical that consumers have a guarantee that the overwhelming majority of subsidy dollars are going toward actual medical care,' Rockefeller said. The figures Rockefeller found are less than the amounts the insurance industry has claimed in the past and 'equate to billions of dollars that the health insurance industry claims to spend providing health care, but actually uses to bolster its profits or pay non-benefit expenses,' he said in his letter" (Nussbaum, 11/2).

This information was reprinted from kaiserhealthnews.org with kind permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives and sign up for email delivery at kaiserhealthnews.org.

© Henry J. Kaiser Family Foundation. All rights reserved.