While TMA sees worth in the minimum MLR values set by the PPACA, we believe the real emphasis should be on standardizing both the definition and the reporting of this percentage. If Congress repeals the PPACA, the Texas Legislature should require a consistent reporting of MLRs. A consistent reporting formula would allow employers and patients shopping for health insurance to more easily compare the performance of their health plan with other plans. The easier it is for employers to shop for economical insurance, the more likely they are to offer it to their employees. The formula needs to specify exactly what insurers can include as a medical cost versus an administrative cost, such as profit or expenses for items such as marketing, administration, and recruitment.
Stop inappropriate insurer rescission and purging practices
The PPACA restricts two common anti-consumer practices of the health insurance industry. If the law is repealed, Texas legislators still could curb the swelling number of uninsured Texans by looking closely at and regulating “rescission” and “purging.” A number of insurers make a consistent practice of getting rid of enrollees they don’t want — the very people who need insurance — when they become a drain on
profits. The widespread use of rescission and purging has made insurers one of the growing causes of the uninsured crisis.100
To help meet profit expectations, the for-profit insurers that dominate the industry use a process called “rescission” to dump covered persons who are less profitable or who get sick. Rescission is the insurance industry practice of retroactively cancelling policies based on errors or omissions in the insurance policy application. However, the use of this practice has drawn negative reaction and publicity because insurers will rescind policies based on an innocent mistake or omission on the insurance application as opposed to intentional fraud by the applicant. Reports found that insurers will scour the medical records of covered persons who start filing expensive claims to determine if they can retroactively cancel their policies. Insurers are increasingly paying incentives and bonuses to their company employees who find omissions or mistakes in their lengthy and often confusing insurance applications.101
If an error or omission is found on the insurance policy application, no matter how innocently made, the insurance company rescinds the policy rather than continue to pay the patient’s medical bills. What is worse, the insurer treats the policy as if it had never existed and attempts to reclaim all
Medical Loss Ratios for Leading Health Insurers 2009 Consolidated
Medical Loss Ratio
UnitedHealthcare WellPoint Humana Cigna Aetna
82.3% 83.6% 82.8% 83.9% 85.2%
2010 Consolidated Medical Loss Ratio
80.6% 83.2% 82.8% 80.1% 82.3%
U.S. Securities and Exchange Commission Filings, April 2012
Note: Medical loss ratios as calculated by companies and in some cases restated for prior years. Consolidated medical loss ratios tend to camouflage low spending on patient care in commercial lines of business.
February 2013 TEXAS MEDICINE 57
2009-10 Change
-1.7% -0.4% 0.0% -3.8% -2.9%
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