Health Insurance Companies Adapt to Reform Through Accounting Schemes
By Yamileth Medina
The Obama administration’s success at passing comprehensive healthcare reform has changed the entire face of the health care industry. Among the differences is the fact that health insurers will now be accountable for spending a majority of the premiums they collect on medical care.
Medical loss ratios (MLRs) are an indicator of how much money is spent on providing health care and paying claims, as opposed to administrative costs or profits. For the first time, limits have been imposed. Small group, family, and individual health insurance plans are now required to spend at least 80 cents out of each premium dollar on care. Large corporate groups, which are easier to administer and generally cheaper on a per-person basis, must have an MLR of at least 85 percent.
The medical loss ratio guidelines go into effect on January 1st, 2011. So far, most insurers have some way to go in order to reach that: the average MLR is 74%, which is better than expected, but still not ideal for consumers. A new report from a Senate committee speculates that some health insurance companies may be using unique accounting tactics to reclassify their expenditures.
WellPoint, in particular, was singled out for shifting some administrative costs towards the medical cost side of the spectrum. They have no comment on the allegations, but changing accounting practices while keeping the business running unchanged has many pitfalls. Not to say that any insurer has the potential to be the next Enron, but the increased consumer protection demanded by affordable health insurance reforms–as well as the continued push for profits from shareholders–may influence them to start on a slippery slope towards accounting fraud.
Meanwhile, corporations that sell health insurance plans deserve to know the regulations they will be subject to. The National Association of Insurance Commissioners has been ordered to release specific MLR rules six months before the deadline, on June 1st. It is fair to give insurers the chance to plan the next steps for their businesses, especially before the end of most industries’ fiscal year on October 30th. At the moment, major insurers can only speculate on what this provision will have in store for them.
(Image: solierdos under CC 3.0)
Yamileth Medina is an up and coming expert on Affordable Health Insurance and Healthcare Reform. She aims to help people realize that they can find a quality health insurance plan right now. Yamileth lives in Miami, FL.
Article Source: http://EzineArticles.com/?expert=Yamileth_Medina
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