Posted on April 27, 2010 by Andrew Kurz
Download PDF Report >>> Insurers’ Efforts to Shift Admin Costs
Senator Rockefeller recently came out with a report cautioning about health insurers efforts to shift Selling, General and Administrative (SGA) expenses to medical costs. A shift would increase medical loss ratios (MLR) allowing insurers to keep more earnings. Two uncertainties affect predictions. First is how plans are grouped and second is how one computes “medical costs” and “premiums”. Below are reasonable interpretations of the new law that favor consumers, not insurers.
HOW ENROLLEES ARE GROUPED
The first order is to define “group.” The more groups are combined, the greater the opportunity for balancing out gains and losses, which is the whole idea of insurance. Continue reading
Filed under: Analyses, Health Costs, Health Insurers, Health Quality, Healthcare Reform, MLR - Financial Ratios | Tagged: bad blocks of business, federal mandate, large groups, medical costs, medical loss ratio, MLR, Premiums, profitable business, R&D, Selling General and Adminstrative, Senator Rockefeller, SG&A, Small groups | Leave a comment »
Posted on April 24, 2010 by Andrew Kurz
Download PDF Report >>> Medical Quality Activities
On April 14, 2010 the Federal Register published a notice for comments to PHS Act Section 2718(c) directing the National Association of Insurance Commissioners (NAIC) to establish:
- uniform definitions of the activities including defining which activities constitute activities that improve quality, and
- standardized methodologies for calculating measures of these activities that to take into account:
- the special circumstances of smaller plans,
- different types of plans, and
- newer plans
These uniform definitions and standardized methodologies will be subject to the certification of the Secretary.
For years, FASB (Financial Accounting Standards Board) has provided guidelines for SG&A expenses that apply to all industries. With this PHS Act directive, health insurers can convert some SG&A expenses into medical expenses to raise their MLR. Since the law allows activities that improve quality to be considered medical expenses, some SG&A expenses will qualify. What does and does not improve quality and not violate FASB standards is the issue.
Expenses can be divided into Continue reading
Filed under: Analyses, Healthcare Reform, Internal Revenue (IRS) | Tagged: allocated expense, FASB, Federal Register, Financial Accounting Standards Board, fixed expense, NAIC, National Association of Insurance Commissioners, PHS Act, section 2718, semi-variable expense, SG&A, standardized methodologies, uniform definitions, variable expense | Leave a comment »