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More ‘bang’ for insurance buck?

By Christine Jordan Sexton
5/21/2009 © Health News Florida

Insurance companies and HMOs should be required to spend at least 85 percent of their revenue on health care, according to Florida Public Interest Group. Most in Florida don't.

FPIRG’s 17-page report, dubbed More Bang for the Health Care Buck, says that if insurers were required to spend more on their customers -- in both prevention and medical expenses -- rising costs could be brought under control and, moreover, Americans would be healthier. 

Specifically, the group is advocating that companies spend at least 85 percent of their dollars on the health care costs of their patients and to limit the amount of money spent on administrative overhead, such as advertising and salaries. Such a standard would force insurers to streamline administration and become more efficient, the group says.

“We buy insurance so that medical care is there when we need it,” FPIRG's Brad Ashwell said in a release. “But how many of our premium dollars go to care, and how many are wasted on endless paperwork and other administrative costs?"

Florida has no requirement for commercial companies to dedicate a set percentage of the premium dollar for patients’ care. An attempt to pass one this year was soundly defeated in the Legislature.

State Sen. Charlie Justice, who had asked for that action in a bill that went nowhere, says it's an idea worth debating. "I'm not trying to be punitive," he told Health News Florida. "It’s disappointing we didn’t even get a hearing.” 

The report's appendix lists several Florida commercial plans and the percentage of the premium they spend on patient care, which in the industry is referred to as the "medical-loss ratio," or MLR. (Sometimes it's called the "medical benefits ratio," or MBR.)

Capital Health Plan, the only non-profit on the list, spent the most on patients' care: 89.6 percent. Two other plans on the list also exceeded the 85-percent mark: Cigna Health Care of Florida, at 85.3 percent, and Anthem Insurance Co., with 87.7 percent.

Two Humana companies, an HMO and a traditional insurer, fell below the benchmark. The HMO came close, at 84.4 percent, but the other subsidiary fell in the 70's. 

Other companies that didn’t meet what FPIRG called the "efficiency standard" were Aetna, at 80.9 percent, and United, at 83.4 percent. The state’s largest insurer, Blue Cross and Blue Shield of Florida, was not included in the report.

One part of Florida Medicaid, behavioral health, requires that at least 80 percent of the premium dollar be spent on patient care. Florida Healthy Kids’ contract requires 85 percent.

Those two program requirements are the ones that tripped up WellCare Health Plans, which admittedly spent less of the premium on patients but didn’t want to pay the money back to the programs, as required. The Tampa company kept the extra money – which amounted to about $40 million -- by sending it through a subsidiary, according to charges filed by the U.S. Justice Department.

While not admitting that it deliberately defrauded the Florida programs, WellCare agreed to pay $80 million to avoid criminal prosecution. It also settled a Securities and Exchange Commission investigation through a promise of $10 million.

Insurers, meanwhile, scoff at the notion that the way to fix the health care delivery system is to require them to spend more. They aggressively lobbied against the bills that would have required that.

“It’s a cheap shot at a faceless corporation,” said Harry Spring, Humana’s director of state government relations. “It’s not dealing with the rest of the overhead in the delivery system,” in hospitals, medical groups, drug companies and so on. 

The report, conducted by PIRG Education Foundation, claims the goal can be met and notes that nearly half of the health plans surveyed for the report spent 85 percent on patient care. The majority of Florida based plans reviewed for the survey, though, did not. 

--Carol Gentry contributed to this report. Christine Jordan Sexton can be contacted at this e-mail