Where Do Californians’ Health Dollars Go?

By Hanh Kim Quach
Health Care Policy Coordinator
Health Access California

The most exciting thing this week (other than Health Access' report release) was the release of the California Medical Association's annual "Knox-Keene Health Plan Expenditures Report,'' which replaces my old dog-eared copy from a couple years ago.

The report gathers data reported by health plans to the Department of Managed Health Care to show which ones spend the most on medical services for their enrollees (and which ones spend the most on administration and profit). This is called the "Medical Loss Ratio,'' you know, because plans ''lose'' money when they spend it on health care for you. The percentage of premium dollars spent on patient care is an important (though not the only) measure of a plan’s value.

Sadly, there is not similar data publicly available for PPOs, which are regulated -- more loosely -- by the Department of Insurance. Not having the data on the Department of Insurance side creates a huge hole for advocates, because 40 percent of insured Californians now buy the less robust insurance products regulated by the Department of Insurance. These plans are required to spend 70% of revenues on patient care and are among the worst offenders on the market. Low-value products are marketed to consumers for their low premiums. Patients do not have the actuarial expertise, or information to assess whether a particular low-premium product will actually provide them value – meaning it would pay for physician visits, drugs and other health costs when they need it. Products that have low medical-loss ratios often do not have maternity coverage, do not cover prescription drugs, have high deductibles, high co-insurance, and lack caps on how much consumers need to spend out-of-pocket for their illnesses. Such flimsy coverage causes consumers to defer care, or leaves them saddled with medical debt. Low-value health plans have dedicated as little as 51 cents of every premium dollar toward on what patients need. Meanwhile insurers spend 49 cents of every dollar consumers pay against consumers -- fighting bills for patient services, scouring health records in order to retroactively rescind policies, and other administrative costs—or to the profit of the insurer.

CMA is the sponsor of SB 1440 (Kuehl), which Health Access also supports. The bill would require health plans spend 85 percent of revenues on patient care (also called Medical Loss Ratios -- 'cause to insurers, they ''lose'' money when they have to spend it on you.) That is different from the current law, which only caps administrative costs at 15 percent (which means profits layered on top of that eat into the amount spent on patient care.) A nice feature of the latest version of this bill is that it will require plans to report the Medical Loss Ratio by product, rather than averaging them across the insurer's entire book of business, allowing the really awful products to be lumped in and hide behind better ones.

Okay, on to the report.

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