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Last week I posted a story about the medical loss ratio rebates health insurance companies are paying this year, and I confess to being a bit surprised at how popular that post remained days later.
Part of that popularity may also have been due to people looking for my answer to the excellent question a commenter posed: If there is a list of insurers who had to pay the MLR rebates. Yes, there is — and incidentally, I had to dig much harder to find it this year than I did last year. Also, neither Highmark Inc. nor Capital BlueCross is on that list.
I'm telling you all this because in the course of searching, I came across two interesting sets of data.
The first reports premium savings in 2012 by calculating what they would have been if the insurer's MLR remained unchanged from 2011. Although the amount paid in MLR rebates in 2012 was only about half the 2011 figure — about $500 million compared to $1 billion — premium savings of $3.4 billion pushed the net impact much higher this year.
The premium savings figures strike me as highly arguable, because MLR, although significant, is just one of many forces acting on insurance companies, and to lay all lowering of administrative costs at its door seems myopic. Then again — to be fair — though in my view the report certainly implies that the MLR is wholly responsible for the drop, it doesn't explicitly draw that line.
Next, administrative costs: Marketing, salaries and bonuses. The report says administrative costs as a percentage of premium dropped across all categories from 2011 to 2012 — 0.6 percent in the individual and small group categories, and 0.1 percent in the large group categories. I was not surprised to see that administrative cost percentages were lower for the larger groups — from individual to small group to large group they go 15.1, 11.6 and 7.3 percent, respectively.
The second report is based on 2011 data and contains complementary data. Profits as a percentage of premium were pretty much the inverse of administrative costs; the small group market had the most, at 5.3 percent, followed by the large group market at 3.8 percent and the individual market at -0.4 percent.
Moral of the story so far: Economies of scale! Or, more powerful consumers get better deals! Or, bigger organizations maneuver more adroitly through health care reform! Or — you know — maybe making any sweeping judgments on a single year of data that comes from a time of great change is ill-advised.
Then comes the part that still baffles me a bit. On pages 12 and 13, the report shows profits by company size in the various markets, separated out by whether they met the MLR standard or owed rebates. In each market, the companies in the smallest class — 1,000 to 4,999 enrollees nationwide — had both the lowest profits of any in that market meeting the MLR standard and the highest profits of any in that market owing rebates.
What do you make of that?
One final factoid from that second report: In 2011, 24.5 percent of health insurance companies did not meet the required MLR standard in at least one market.
That's lower than I expected, somehow.
If you didn't catch our Monday live chat featuring Andy Carter, president and CEO of The Hospital & Healthsystem Association of Pennsylvania, you should give it a replay. Yes, it will lack the high-wire drama that is watching an unrehearsed Q&A in real time — sorry, that opportunity was one day only — but even though you'll now have to read it straight through, it is still informative on a rather dizzying array of topics.
Also, I hope you've already signed up for our annual Healthcare Symposium, which is happening at the Radisson Hotel Harrisburg. If you haven't already, our event website currently says registration is closed but limited seats are available. It will feature some experts you probably know from our articles and live chats — Rob Glus of Conrad Siegel Actuaries, Dave Vassilaros of Benecon and the aforementioned Andy Carter of HAP — plus several others who are bringing wisdom from afar.
And, of course, I'll be there — observing, mind you, not presenting. Please feel free to say hi if you see me!
Finally, speaking of the live chat, one of those aforementioned many topics was proposed delay of disproportionate share hospital payment cuts, and this is an interesting read on that subject.