Health insurers hide administrative costs, profits as ‘medical costs’

According to an April 15 Senate report, the six largest for-profit health insurance companies spent approximately 26 percent of premiums for individual plans on profits and administrative costs and not on medical care in 2009. Rather than spending more on health, health insurance companies are changing accounting measures to “reclassify” profits and administrative costs as “medical care.”
 
Spending relatively little on health care is nothing new in the insurance industry. While insurance companies retain control over medical care, their bottom line is profit. In 2008, health insurance giant CIGNA spent as little as 37.2 percent of large group policy premiums on actual health care. The rest of the money went to insurance administration costs and profits.
 
A low percentage of money spent on care, referred to as the “medical loss ratio,” benefits investors because it increases profit. The profit motive pushes money spent on actual medical care to a minimum. Despite insurance reform, the health care profit motive must be dismantled before people begin receiving the treatment that they deserve.