Health Insurers Must Pay Up Or Pay Back
By Jim Spencer and Glenn Howatt, Star Tribune (Minneapolis) | |
McClatchy-Tribune Information Services |
One of the aims of the law is to make for-profit companies like United spend at least 80 to 85 percent of the premiums they collect on patient care and quality improvements. Companies that don't must pay back the difference to policyholders in cash or lower future premiums.
The idea is to enhance efficiency and effectiveness while balancing premiums and profits.
For now, a
By 2013, United, the nation's largest health insurer, had cut its mandatory annual premium refunds to roughly
"A lot more of [each] premium dollar is being spent on care by for-profit companies," said
McCue, an expert in so-called medical loss ratios that determine premium refunds, believes insurers will continue to adjust premiums rates and claims predictions in hopes of avoiding refunds.
Pushing premium dollars into patient care and away from other expenses is what U.S. Sen.
"The more you spend on administration, marketing, CEO salaries and profits, the more health care is going to cost everybody," Franken said in an interview.
Franken, a Democrat, originally proposed that insurers spend 85 to 90 percent of premiums on care or be forced to refund the difference. He settled for a compromise of 80 to 85 percent, depending on whether coverage was for individual, small group or large group policies.
As a result, Franken said, health insurance costs are now rising more slowly than they have in decades. "What we hoped and thought would happen happened," he said.
Whether spending a bigger share of premium dollars on patient care improves health outcomes remains a matter of conjecture.
"After the economy collapsed [in 2007], claims were climbing at much lower rates than they had been," said Jost, one of the nation's leading experts on the Affordable Care Act. "But premiums kept going up at double-digit rates."
The results, according to Jost, were record profits for for-profit health insurers and record reserves for nonprofit insurers.
Premium refunds, he said, have forced companies of all kinds to set premiums and conduct business in ways that are "more realistic."
On a per member basis, United's largest premium refunds and adjustments have come for people covered under individual policies. Using membership information provided by the
A United spokeswoman said in an e-mail to the
"They are trying to benchmark the allowable profitability and still offer a competitive package," Heupel said. "What you don't want to do is underprice on false assumptions."
That distinguishes for-profit companies from nonprofit companies, Virginia Commonwealth's McCue said. Nonprofit health insurers have traditionally spent more than 85 percent of premiums on care, he noted, so most nonprofits have not needed to refund premiums under the new law.
One for-profit strategy could be to predict claims and set premiums planning to pay a small rebate, added
"If you do have to pay rebates, you don't lose much," he said. "If you don't have to pay rebates, you maximize profits."
Besides, getting a refund might actually produce brand loyalty in customers, Jost and Heupel suggested.
But
"They were interested in this before," he said. "But no one was holding them to a standard,"
Parente says United is "narrowing the hospitals and providers they deal with and negotiating rates" to cut costs and make sure they don't have to pay premium refunds.
However, Heupel does not think for-profit companies will ever spend more than the legally required 80 to 85 percent of premiums on patient care. Otherwise, they will cut into profit margins that are critical to maintaining stock prices.
"It's not like you get anything back if you get to
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