The Riverside Press-Enterprise this week had an editorial called “Health Stumble” bemoaning Sen. Sheila Kuehl’s SB1440, which would require all health insurance offered in the state to spend at least 85% premiums on providing health care — that is physical exams, surgery, mammograms — you name it. SB1440 is now awaiting concurrence on the Senate Floor — thank goodness.
They cite a Rand Corp. study which *only* looked at health plans regulated by the Department of Managed Health Care. Those health plans are not allowed to spend more than 15% on administration (of course, that doesn’t count profit, but at least it’s a target). But, as we know, health insurance plans in California are regulated by two agencies — DMHC *and* the Department of Insurance.
Until a couple of years ago, some plans at the Department of Insurance (ahem, Blue Cross) spent as little as 51 cents for ever premium dollar on health care. (This we gleaned from a DOI powerpoint presentation at a public hearing). Meanwhile the company would spend 23 cents of every dollar consumers pay to use against consumers — fighting bills for patient services, scouring health records in order to retroactively rescind policies, and other administrative costs. The remaining 27 cents is reserved for profit and executive bonuses.
That was changed and the DOI now requires that health plans spend at least 70% of their premiums on providing health care — but that’s still far short of 85%.
The Press-Enterprise argues that “medical loss ratios” don’t really tell us much about the plan’s efficiency or quality of care. True — but right now, we have *nothing*.
In an information void, such as the one we have now, the percentage of premium dollars spent on patient care is an important (though not the only) measure of a plan’s value. Unfortunately, low-value products (like the ones offered at DOI) are marketed to consumers for their low premiums. Patients do not have the actuarial expertise, or information to assess whether a particular low-premium product will actually provide them value – meaning it would pay for physician visits, drugs and other health costs when they need it.
Products that have low medical-loss ratios often:
- do not have maternity coverage,
- do not cover prescription drugs,
- have high deductibles,
- high co-insurance, and
- lack caps on how much consumers need to spend out-of-pocket for their illnesses.
Such flimsy coverage causes consumers to deter care, or leaves them saddled with medical debt. And that’s a stumble.