Senate Committee finds inadequate medical-loss ratios are common

Insurance companies generally don't have sufficient medical-loss ratios to pass muster under pending health reform law requirements according to a new report from the U.S. Senate Committee on Commerce, Science, and Transportation, says the Wall Street Journal.

Starting Jan. 1, 2011, insurers will have to spend 80 percent of individual and small-group plan premiums on medical care and 85 percent of large-group premiums. However, many insurers don't meet that threshold, says Sen. John D. Rockefeller IV (D-W.V.), the committee chair. For example, the 2009 medical-loss ratios for individual plans came in at 75.5 percent for Aetna, 68.1 percent for Humana, 70.5 percent for UnitedHealth Group, and 74.9 percent for WellPoint.

"In the individual market...the largest health insurers spent on average more than 26 cents out of every premium dollar on administrative costs and profits," reports the committee. "In some individual markets, insurers are spending more than one third of each premium dollar on non-medical expenses.

Some companies, such as WellPoint, have already begun to re-classify expenses to improve their medical-loss ratios, and analysts expect insurers to institute other initiatives, including additional rate increases, to prepare for upcoming changes, reports the Washington Post.

To find out more about the report:
- read this Wall Street Journal blog post
- read this press release
- read this Washington Post article