Remember All Those Studies of Administrative Costs that Never Bothered to Define What an Administrative Cost Is?

It’s a simple question, but one with a complex answer: In health insurance, what counts as a medical expense?

Claims for visits to physicians clearly fit the bill; likewise for surgeries and hospital stays. But what about a 24-hour nursing hotline? Does a flier in the mail that encourages subscribers to reduce sodium intake count? Or a new computer system to better manage care for multiple chronic conditions?

This question is far from rhetorical. Under health care reform…insurers will have to spend at least 85 percent of subscriber premiums on medical expenses in small- and large-group markets and at least 80 percent in individual policies.

Full article on health reform’s new medical loss ratio regulations.

Comments (6)

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  1. Devon Herrick says:

    Unfortunately, fraudulent (and wasteful) payments to health care providers are part of the medical loss ratio; whereas funds spent to prevent fraudulent payments to bogus medical providers would fall under administrative costs.

    This means insurers will be forced to tolerate a certain amount of fraud and waste. If insurers expend additional funds to prevent the abuse, any cost in excess of the 15% allowable ratio for administration would have to be refunded.

  2. Bruce says:

    The answer to your quesion is: Yes, I rmember those studies and they were awful.

  3. Virginia says:

    I smell an accounting scandal.

  4. Tom H. says:

    I never believed any of those studies anyway.

  5. Linda Gorman says:

    Medical expenses are now whatever government bureaucrats say they are.

  6. Stephen C. says:

    Mare importantly, medcial expense ratios (or loss ratios) have become political statistics — devoid of rational content.