Spend Patients’ Dollars on Health Care, Not Elsewhere

For immediate release
Feb. 23, 2009

Contact: Pam Udall
phone: (512) 370-1382
cell: (512) 413-6807
Pam Udall

Contact: Brent Annear
phone: (512) 370-1381
cell: (512) 656-7320
Brent Annear

It's no wonder America's health care system is in big trouble when what most people consider actual medical care is counted as a "loss" on the health insurance companies' balance sheets.

The publicly held health insurance companies control much of the health care dollar. They run on one premise: to protect the interests of their shareholders. Patients and employers, on the other hand, believe health insurance is to help pay for their health care when necessary. The patients pay ever-increasing premiums so they can see a doctor and receive health care. Unfortunately, health insurers can pad their profits by spending less of the premium dollar on health care.

"While health plan profits soar, premiums keep increasing and patients continue to pay more out of pocket for their care," declared Josie R. Williams, MD, president of the Texas Medical Association (TMA). "Health plans don't tell us how they're spending your premiums.

"It's disconcerting that insurance companies call the money they spend on our patients' care the 'medical loss ratio;' isn't that what the premium dollars are supposed to be for?" asked Dr. Williams. "Insurers call it that because they suffer a financial loss when they pay for a patient's medical care."

Employers and employees are spending more money on health insurance each year but have no idea exactly where their health insurance premium dollars are going. Physicians believe health insurers must be more accountable and more transparent about how they spend patients' premium dollars. Doctors believe health plans should clearly disclose how much of each premium dollar goes toward direct patient care.

TMA is calling for a consistent reporting formula for the medical loss ratio. That way, employers and patients shopping for health insurance could easily compare the performance of their health plan with other plans. The formula would specify exactly what insurers could include as a medical cost, as opposed to profit or expenses for items such as marketing, administration, and recruitment. The easier it is for employers to shop for economical insurance, the more likely they are to offer it to their employees.

Doctors believe this is more important than ever since health insurers have doubled the cost of premiums for employer-based insurance since 2000. The average cost for family health insurance coverage in America is now more than $12,600 annually. In addition to disclosing how premium dollars are spent, employers deserve to know how the premium was calculated to begin with.

"Unless people ask, they're not going to get the information," said Austin obstetrician-gynecologist Albert T. Gros, MD, chair of TMA's Council on Legislation. "And for those who do ask, it's really an eye opener if you can get the information." 

It was an eye-opener for one small business, the Harris County Medical Society (HCMS). HCMS faced large premium increases for its 21 employees in 2005 and 2006. When the organization inquired about the 22.4-percent increase for 2006, what it found was startling. Its health insurer only spent 67 percent of the organization's premium dollars on health care. "It just does not seem to justify the level of increase," said HCMS Executive Vice President Greg Bernica. Over the past four years, the picture remained the same for HCMS. The average medical loss ratio for their PPO plan is 52 percent, and only 40 percent for their Health Savings Account. "If that medical loss ratio was closer to the ideal 85 percent, we would have paid $257,000 less in premiums. Imagine how many more businesses could insure their employees if they saw that kind of savings," Mr. Bernica added.

Most Texans agree change is necessary. A 2007 statewide poll found that almost three out of four Texans agree with the statement, "America's health care system puts insurance profits ahead of patient care." To address this issue and other health insurance reforms, TMA is working with state legislators to enact the Health Insurance Code of Conduct 2009 as part of TMA's 2009 legislative platform.

Physician leaders note the good news for patients is that legislators already have filed bills to bring more transparency to how health insurers calculate medial loss ratios. Rep. Rafael Anchia (D-Dallas) filed House Bill 531 and Sen. Robert Deuell, MD (R-Greenville), filed Senate Bill 485.  

TMA is the largest state medical society in the nation, representing more than 43,000 physician and medical student members. It is located inAustin and has 120 component county medical societies around the state. Organized in 1853, TMA's key objective is to improve the health of all Texans.

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