Yep, you heard it right. America's Health Insurance Plans, or more lovingly known to us as AHIP, wants to have its way in re-classifying administrative expenses as medical expenses. For instance, here's how AHIP can benefit from this---it allows their member insurer organizers to pocket even more money that would've otherwise gone to consumers. As was the case with WellPoint, re-classifying administrative expenses as medical expenses allowed them to keep a cool $500 million dollars in their pockets while appearing to meet the medical loss ratio. If they hadn't done that, that $500 million dollars would've gone to us as premium rebates.
That's where you guys come in, and we need your help in keeping an eye on AHIP and its consortium of private insurance companies. Here's more from the news story below the jump:
AHIP wrote that all disease-management, wellness and care-coordination programs; nurse call lines; patient-safety efforts; education; and value-based purchasing programs such as pay-for-performance and gainsharing be classified in the ratio as quality-improvement activities.
These are administrative expenses that would now be re-classified as quality-improvement activities as a part of medical expenses. The report, released by Senator John Rockefeller's committee, shows that:
While the NAIC accounting rules define "medical loss" as the value of medical claims an insurer has actually paid ("incurred claims"), plus the amount of money the insurer sets aside to pay future claims ("contract reserves"), the new law will potentially allow insurers to classify a broader set of expenditures as medical.
Under the new law, insurers will be able to consider expenditures on "activities that improve health care quality" as medical expenses for the purpose of calculating medical loss ratios. For example, if an insurer spends 78% of its small group premiums paying claims and 2% on quality-improving activities, it will have met the law's 80% minimum medical loss ratio requirement. The law instructs the NAIC, subject to the certification of the Secretary of HHS, to establish uniform definitions of "activities that improve health care quality" and "non-claims costs."
And the report also delves into the re-classification of administrative expenses as medical expenses by WellPoint:
A recent announcement about accounting changes by insurance giant WellPoint is a first indication of how for-profit insureres will approach this issue. In the company's most recent investor call, WellPoint executives announced that the company has started "reclassifying" certain expenses that the company had traditionally classified as administrative expenses. This reclassification involved expenditures on the following items:
1. Nurse hotline
2. Health and wellness, including disease management and medical management
3. Clinical health policy
By reclassifying these administrative expenses as medical benefits, the executives projected that WellPoint's 2010 medical loss ratio (which the company calls its "benefit expense ratio") would increase by 170 basis points, or 1.7%. Because WellPoint expects to collect more than $30 billion in premiums from its commercial health care customers in 2010, this "accounting reclassification" means that the company has converted more than half a billion dollars of this year's administrative expenses into medical expenses.
It's why AHIP is so hot to trot in seeking a broad definition of the medical loss ratio. However, there's a small problem---the news story linked to the wrong comment submitted by AHIP. The comment submitted was on the rate review, not on the medical loss ratio.
Can you please help us find the right comment by AHIP? It's why we're looking for a team of kick-ass volunteers in researching the comments submitted on the medical loss ratio. Here's how you can help us:
Here's How You Can Help
1. You can send me an e-mail at pleasehelpfreebarneythedog@gmail.com to sign up for the crowd-sourcing project. We have a google group called Volunteers For HHS Comments where we can share information on what we find.
2. We'll start from the top down, assign several comment pages for kossacks to cover.
3. For anything you find, please bookmark the page where you found the comment, and identify whether it is a consumer group or a health insurer group.
Thanks for becoming a part of our kick-ass team of volunteers! Let's keep the light shining on the murder-by-spreadsheet industry.