For Small Customers, Health Care Dollars Don't Buy as Much Medical Care

For months, we’ve been hearing that about 15 percent of health insurance premiums are spent on administration and profits.
Here’s Brian Sassi testifying before a Congressional subcommittee last week.
Sassi is an executive with Wellpoint, a $62 billion dollar insurance company that owns New Hampshire’s Anthem Blue Cross and Blue Shield.
Sassi: “Last year, Price Waterhouse Coopers conducted an analysis of how the typical health insurance premium dollar is spent. My written testimony includes a chart that shows that 87 cents of every premium dollar is paid out to cover the cost of health care claims.”
But consider this: that’s an average.
And if you’re a small customer, it doesn’t tell the real story.
Federal and state statistics do.
They show that almost 20% of the premiums paid by New Hampshire companies employing 2 to 9 people go to paperwork and the bottom line.
And if you buy insurance in the individual market, the first 40 cents of every premium dollar goes to your insurance company.
This matters, because at an average of $13,600 New Hampshire has among the highest family premiums in the country.
Only about 7 percent of all insured people here purchase insurance individually.
But as more and more people lose jobs – and therefore, their health insurance -- they move into the individual market.
And that so little of these premium dollars go to health care is patently unfair – or so says Debbie Socolar.
Socolar directs the Health Reform Program at Boston University.
Socolar1: “The patients and the employers do deserve to get a better deal for their health care dollars than having something like 58% of what they pay out in premiums going for actual care and the rest being eaten up.”
Insurance company executives say that some administrative costs are unavoidable.
Chris Dugan is a spokesman for Anthem in New Hampshire.
Dugan1: There’s a cost with administering, say, plans to 50 different individuals versus a group of 50 that work for a particular business.
And Dugan says that administrative dollars benefit customers, by providing electronic medical records, disease management, and care coordination services.
But none of New Hampshire’s largest insurance carriers, or the insurance industry trade group, would say just how much of their small customers’ premium dollars pay for health care.
Dugan2: I don’t have that information right in front of me… I don’t have the percentages for large group, small group and individual.
Dilday1: We don’t report it specifically.
Zirk2: Uh, I don’t know the specific ratios for all the margins.
That was Chris Dugan of Anthem, Gwyn Dilday of Cigna, and Robert Zirkelbach of AHIP, the insurance industry’s trade association.
BU’s Debbie Socolar says this lack of transparency is a problem.
Socolar2: “There’s not good documentation. The insurers are not very inclined to be public about what proportion of that is actually necessary administrative expenses.”
Local insurance companies aren’t breaking any laws.
New Hampshire only requires that 60% of an individual insurance premium pay for health care.
In an acknowledgment that that standard may be too low, the state’s insurance department is raising it to 65 to 75 percent.
This issue has arisen in the national health care debate.
At least one plan before Congress would require insurance companies to spend a minimum of 85% of premium dollars on health care.
And in New Hampshire, Representative Susi Nord, a Democrat from Candia, introduced similar legislation.
Nord1: “This gives the New Hampshire Department of Insurance a criteria for saying y’know, that rate increase is just outrageous. It’s too much. And yes maybe costs are going up, but you’re making a lot of money, and just because costs are going up doesn’t mean you get to keep raising rates.”
Advocates argue that laws like this hold premium costs down, increase benefits, or even force insurance companies to refund money to customers.
The legislature will take up that bill later this year.
How it will fare against a powerful insurance lobby remains to be seen.
But if it should pass, New Hampshire will join 15 other states in the nation with similar laws.
For NHPR News, I’m EG.