The story inside United Healthcare’s jumping profits

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Wall Street was moderately pleased today that the first-quarter profits of United Healthcare, the biggest health care company in the U.S., jumped 21 percent in the first quarter. By definition, that means the rest of us shouldn’t be, because every dollar spent on overhead–including profit–is a dollar less spent on making us healthier. That’s the Catch 22 of our whole for-profit health care system–insurers will do whatever it takes to keep Wall Street happy even when we’re all required to buy their product.

One reason UHC did so well, even though it lost commercial business in the quarter, is that it spent fewer of our premium dollars on health care. Its "medical loss ratio," i.e. the dollars it "lost" by having to provide actual health care, dropped from  82.4 percent of premium revenue to 81.3 percent. The company credited a mild flu season and strong expense

"Strong expense management" refers to the pencil-pushers in the back room whose job is to delay and deny the care your doctor prescribes. Delay is almost as profitable as denial. Every day a dollar is not spent is a day it earns interest for the company. Yet this is one of the functions that insurance companies are now transferring into the "medical care" column.

Why? From the Reuters story:

The medical loss ratio (MLR), which Wall Street has always
watched closely, has come under increased scrutiny by
Washington and will be regulated under the new law.

The government is in the process of devising rules for how
the MLR will be calculated and applied, causing uncertainty for
the industry.

By moving administrative jobs into the medical care category, United Health Care will be able to meet health reform requirements for medical loss ratios of up to 85% without sweating, and still make just as much profit. 

A lot of what insurance companies can get away with will depend on how new regulations to govern the health care reforms are written–and who gets to write them. So keep an eye peeled for news about that regulation stuff, no matter how much it hurts. 

Consumer Watchdog
Consumer Watchdog
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