Consumer advocates urged
the Obama administration Thursday to investigate what they called an
effort by large for-profit insurance companies to slash spending on
medical care even as they raise premiums.
In a letter to Health and
Human Services Secretary Kathleen Sebelius, Consumer Watchdog and the
Center for Media and Democracy said that insurers reported less medical
spending in recent months ahead of new federal rules that will require
the companies to do just the opposite starting next year.
Under the nation’s new
healthcare law, insurers will have to devote at least 80% of premiums to
medical claims for individuals and small businesses, and as much as 85%
of premiums for policies covering large businesses.
Federal regulations are
being drafted to clarify what constitutes medical costs and
administrative expenses. As those rules are finalized, the two consumer
groups want the U.S. Department of Health and Human Services to examine
medical spending by major insurers such as WellPoint Inc., Cigna Corp.
and UnitedHealth Group, and make the findings public.
“Insurance companies appear
to be making sure that when new federal rules for spending on
healthcare kick in next year, they can keep their administrative bloat
and profits intact,” said Judy Dugan, research director of Consumer
Watchdog in Santa Monica.
The insurance industry’s
Washington lobbying arm insisted that a few months of financial data may
obscure the fact that insurers devote most of their premium income to
An executive with America’s
Health Insurance Plans said that administrative spending by major
insurers has declined steadily for six straight years.
“All the data show that the
vast majority of the premium dollar goes to pay for direct medical
services,” said Michael Tuffin, the group’s executive vice president.
“We’re spending money on the 200 million people we serve. The track
record is clear: This is an efficient, low-margin industry.”