Insurance Companies Work to Circumvent Spending Rules

March 6, 2017

According to a report by a U.S. Senate panel, leading health insurers in the United States are altering their accounting practices in an effort to pass administrative expenses off as medical costs to circumvent reforms in the industry.

As part of the health care law passed in March, insurance companies must adjust their spending practices. Large group plans will be required to put 85 cents of every premium dollar toward actual medical care, with individual and small group plans held to 80 cents.

Because Wall Street monitors such spending levels or medical-cost ratios, the stock indexes of the major health insurers fell in the wake of the reform package’s passage.

In a statement, the Senate Committee on Commerce, Science, and Transportation said, “The insurance industry is beginning to consider the financial impact of the new federally required (medical) loss ratio requirements, including questionable changes in their accounting practices,” and went on to cite more than half a million dollars in administrative expenses WellPoint Inc. has reclassified as medical expenses.

Senator John Rockefeller, the chair of the committee said, “This new data makes clear that too many health insurance companies are still putting profits before people and they have a lot of work to do to meet the consumer protection requirements of the health care reform law by the end of this year.”

Reuters, reporting on the controversy, contacted a number of insurers who did not offer comment, although Chris Curran of Cigna said it was too early to say how the rules changes would affect procedure at his company.