Drawing a parallel to the actions of credit card companies that hiked interest rates in advance of new federal regulations, non-partisan advocacy groups Consumer Watchdog and the Center for Media and Democracy recently asked the government to launch an investigation into for-profit insurance companies that are reducing their spending on healthcare in advance of pending reforms.
"Insurance companies appear to be making sure that when new federal rules for spending on healthcare kick in next year, they can keep their administrative bloat and profits intact," said Judy Dugan, research director of Consumer Watchdog.
The groups brought their concerns to President Barack Obama's administration in a joint letter sent Thursday to Health & Human Services Secretary Kathleen Sebelius. Among the warning signs, the letter noted, are attempts by the insurance companies to redefine many administrative expenses as "healthcare expenses."
This effort is in advance of new regulations requiring insurance companies' medical spending to increase to 80 percent of premium dollars for individual and small group policies and 85 percent for large group policies.
"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 (known in the industry as the "medical loss ratio," or MLR, a telling description of how providing healthcare is regarded by Wall Street.) The MLR reductions, and the insurance industry's heavy lobbying of state insurance commissioners who are writing proposed regulations, appear designed to evade the law's requirement that insurers provide better healthcare at lower administrative cost."
The most recent red flag went up when Cigna, the last of the seven companies to report earnings, showed a 6.4 percent drop in its medical spending, which lowered it MLR to 78.8 percent.
In light of these recent financial results, the two groups are asking HHS to demand more detail about the MLR reductions by Cigna and other insurers and make the results public. In addition, the groups asked HHS to tighten the new definitions of what items can be included in the determination of MLR.
"The National Association of Insurance Commissioners, which is finalizing proposed regulations to decide how medical loss ratios are defined, is being lobbied by insurers and their lawyers with an intensity that makes the lobbying of Congress pale by comparison," the letter stated. "As the proposed regulations are being finalized, they risk being further weakened. It will be up to HHS to right the balance."
"Presumably the MLR reductions at Cigna and other companies involved what insurers call 'aggressive medical management' to reduce the amount of care provided enrollees," the letter added. "However, it likely also involved the movement of more enrollees into plans that require greater cost sharing and provide less care through marketing or price coercion."