A recent report from the Insurance Watchdog Coalition suggests that some health insurers may not be fully transparent about their medical care expenditures. The findings, first reported by The Daily Caller News Foundation, reveal that Medicare Advantage (MA) plans reported a Medical Loss Ratio (MLR) of nearly 90% for 2023. However, according to their own filings, medical and prescription-drug claims accounted for only 82.5% of total revenue, falling short of the 85% federal requirement and indicating a discrepancy of $36 billion from their initial claims.
The Affordable Care Act (ACA) of 2010, commonly referred to as Obamacare, requires insurers to disclose the percentage of premium revenues spent on clinical services and quality improvements, known as MLR. The ACA mandates that health insurance companies utilize at least 80% to 85% of premium funds on medical expenses, as stated by the Centers for Medicare and Medicaid Services (CMS).
According to the report, “Current MLR rules allow plans to classify expenditures that aren’t directly related to medical care as if they are.” This includes administrative costs, which can count as “quality improvement.” Even benefits like gym memberships and cash cards for daily expenses may be classified as “medical spending.”
Mark Merritt, Executive Director of IWC, noted that there has been a common misconception among policymakers regarding the MLR. He stated, “For years, people believed MLR meant that insurers spent 85% of every dollar on healthcare. However, insurers have manipulated the system, categorizing billions in overhead and marketing costs as ‘medical’ expenses. We need genuine transparency to ensure that healthcare dollars reach patients rather than just benefiting insurers.”
The IWC analysis also suggested that CMS should mandate health plans to report their payments to providers, pharmacy benefit managers, and other owned businesses as a separate line item in the MLR filing. It emphasized the need to compare these payments with what independent providers are compensated.
The MLR data included in the IWC report was generated using the CMS’s Contract Year 2023 Part C/Part D Medical Loss Ratio Public Use File and does not account for payments made to affiliated providers.
This report’s timing coincides with a rise in calls for increased transparency within the U.S. healthcare system. In July, Republican Texas Representative Nathaniel Moran introduced legislation aimed at requiring insurers to disclose the proportion of their total revenue spent on patient care versus administrative costs. He highlighted the importance of transparency and accountability in healthcare reform, stating that his bill aims to provide clearer information about the allocation of Medicare Advantage funds.
