Insurers urged to put more into care

LINCOLN — Businesses and individuals could save billions each year if health insurance companies spent at least 90 cents of each premium dollar to pay claims, a group said Thursday.

The Nebraska Main Street Alliance released a report that says too large a share of health care premiums now goes to CEO salaries, bonuses, marketing, lobbying and overhead.

The study cited information from PricewaterhouseCoopers, a financial consulting firm, showing that publicly traded health insurers used 95 percent of their premium revenue for medical benefits in 1993.

But that figure, known as the “medical loss ratio,” has been declining over the past 14 years. By 2007, publicly traded insurers spent 81 percent on benefits.

“People are not getting value for what they're paying for,” said Jennifer Carter, who works with the Nebraska Appleseed Center for Law in the Public Interest.

Along with a trio of Lincoln small-business owners, Carter called for Congress to require that insurers pay out at least 90 percent in benefits.

That could reduce the cost of premiums and aid businesses like his own, said Rick Poore, owner of DesignWear.

“I'd like to keep some of my own money to make my business grow,” he said.

But Terry Headley, owner of Headley Financial Group in La Vista and president-elect of the National Association of Insurance and Financial Advisors, said such a requirement could put insurers in financial jeopardy.

The bulk of premium revenue not spent on benefits goes for operating expenses, he said. That includes payroll expenses, premium taxes of 2 percent to 4 percent and money put in reserve to cover catastrophic medical expenses.

Health insurers typically have profit margins of only 2 percent to 4 percent, Headley said.

“I don't know that there's quite as much juice in the orange” as people might think, he said.

An amendment to the Senate health care bill, filed by Sen. Al Franken, D-Minn., would require insurers to rebate customers if their medical loss ratio falls below the 90 percent level.

If the amendment had been in place in 2008, the Main Street Alliance report estimated, rebates to consumers would have been $54.5 billion.

Some states, but not Nebraska or Iowa, set minimum requirements for medical loss ratios.

Contact the writer:

402-473-9583, martha.stoddard@owh.com

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