A Senate committee reviewing health insurers' profits has slammed Aetna for allegedly spending less money on patient care for some small businesses than it previously reported in regulatory filings. The charges stem from an investigation started last summer by the Senate Committee on Commerce, Science and Transportation, which is taking a hard look at the percentage of premiums health insurers spend on paying health costs.
This number, known as the "medical loss ratio," is a critical one for publicly-traded health plans, whose performance is judged in some part by how effectively they stick to their predictions. Whether or not Aetna cooked the books this time, it's undeniable that the Street puts great pressure on health plans to meet or beat their competitors' loss-ratio numbers.
The Senate committee says that Aetna overstated its spending on small business patient care to $4.9 billion. The mis-reported number transformed the insurer's medical-loss ratio for small businesses to 79 percent, not the 82 percent Aetna initially reported to regulatory authorities. This is just the kind of slip health insurance industry critics are looking for, who say that insurance companies are diverting too much money away from care.
Aetna has said that the error was a mistake, and that it filed an amended report to the National Association of Insurance Commissioners on Dec. 2 to correct the problem.
To get more background on this issue:
- read this Wall Street Journal piece (sub. req.)
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