Study: 1 percent of 2011 premiums went to quality improvements
In the first year of new medical loss ratio (MLR) requirements, insurers spent less than 1 percent of premium revenue on rebates or quality improvements, according to an analysis by the Commonwealth Fund.
In 2011, the amount of premiums rebated back to plan members or reinvested in quality, safety or wellness improvements varied among publicly-traded, for-profit, nonprofit and provider-owned insurers, health policy researchers Mark Hall and Michael McCue found.
Publicly-traded insurers had lower MLRs in the individual, small group and large group markets and were more likely to owe members rebates than nonprofit and provider-owned insurers, according to the study.
Across all markets, more than 20 percent of for-profit and non-provider-affiliated insurers paid consumer rebates because they fell below the MLR baseline, compared to less than 10 percent of nonprofit and provider-based health plans.
Median quality improvement spending per member among nonprofit and provider-based health plans was also higher than the median among for-profit insurers, Hall and McCue found, after studying the 947 insurers that were subject to the MLR in 2011.
In total in 2011, the study found, insurers subject to the MLR spent a total of $2.3 billion (0.74 percent of premium revenue) on quality improvements, and, in a separate MLR category, spent $1.1 billion (0.35 percent of premium revenue) on quality and cost-reduction incentive payments to providers.
On average, insurers spent $29 per member on quality improvement in 2011, with the median insurer spending $23 per member, the top quartile $40 and the bottom quartile less than $12.
In 2012, 14 percent of all health insurers paid more than $1 billion in consumer rebates, based on 2011's MLR, which also led to a roughly $1 billion reduction in administration and profit margins in the individual, small group and large group markets, the study found.
In the individual market, 48 percent of publicly-traded insurers owed a rebate, compared to 28 percent of privately-held health plans, although on a per-member basis, the median publicly-traded insurer owed a smaller rebate -- $94, compared to $174 for privately-held insurers.
Only 8 percent of nonprofit insurers owed a rebate in the individual market, with median per member rebates of $34, while the median provider-sponsored plan paid a rebate of $23.
Median rebates in the small and large group markets, meanwhile, showed somewhat less variation. Publicly-traded plans in the small group market paid a median of $111, compared to $119 for non-publicly-traded plans; for-profit plans paid a median of $119, compared to $88 for nonprofits and $72 for provider-based plans.
In the large group market, publicly-traded insurers paid a median rebate of $90, compared to $140 for privately-held insurers; for-profit plans paid a median of $99, nonprofits a median of $91 and provider sponsored plans $176.
Overall in 2011, insurers subject to the MLR devoted 84 percent of premium revenues to medical expenses, 11 percent for administration, 3.9 percent as pre-tax profits, 0.7 percent to quality improvements and 0.5 percent to rebates.
Out of the $2.3 billion spent on quality improvement in 2011, according to the study, 51 percent went to outcomes improvement, 17 percent to health information technology expenses, 13 percent to wellness, 10 percent to patient safety and nine percent to hospital readmissions improvements.
The overall level of spending on quality improvement suggests "that current market forces do not strongly reward insurers' investments in this area," write Hall, a Wake Forest law professor, and McCue, a professor of health administration at Virginia Commonwealth University.
More detailed quality measure reporting might be needed, they suggest. "To be most useful, HHS should synthesize and disseminate this information in a fashion that consumers find useful and relevant, in order to stimulate competitive pressures for health plans to improve quality of care."
America's Health Insurance Plans (AHIP) challenged some of the conclusions of the report, saying the MLR data doesn't account for a variety programs and services many insurers are offering.
Moreover, AHIP argues, the MLR has been fairly arbitrary in what it caps, even on spending tied with quality-improvements and cost reductions -- like accountable care partnerships, provider credentialing, personal health records, drug interaction monitoring and fraud prevention.
