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Q: Medical loss ratio by state ( Answered,   0 Comments )
Subject: Medical loss ratio by state
Category: Business and Money > Finance
Asked by: sanfran-ga
List Price: $200.00
Posted: 20 Nov 2006 15:07 PST
Expires: 20 Dec 2006 15:07 PST
Question ID: 784358
Question: how do the medical loss ratios among the large US health
insurance companies (e.g., Aetna, Cigna, WellPoint, Humana, United)
differ by state?

It appears that MLRs are higher in NY and Georgia state -- what may be
the reasons for this?  (this question is the most important one) 

I suspect this information is not available through their SEC filings,
though I may be wrong.  However, Insurance regulators by state may
have this info.  For backround on MLR, see the following good brief
Subject: Re: Medical loss ratio by state
Answered By: umiat-ga on 11 Dec 2006 00:02 PST
Hello, sanfran!

 The only chart I was able to find which compared medical loss ratios
by state for some of the major insurance companies is from 1997.
Compiling data for a question of this nature would be a major
undertaking, probably requiring an investigation into each company's
financial statements coupled with data that might be residing within
each state's insurance regulation department. This would entail a
major research project to search for information that might not even
exist in a concise format! Rather than leave you with nothing, I think
the following information might provide some good insight.

 I am a bit curious, however, where you got the impression that
Georgia and New York have the highest medical loss ratios. I did not
uncover any information pertaining to that fact in my research. If you
get back to me on this, perhaps I can follow another lead.


The following report contains some medical loss ratios by state for
some of the leading healthcare companies. This data is from the
1990's, and the compilation of the data came from several sources -
which should give you some idea of why this information is so
difficult to come by!

From "Use And Abuse Of The Medical Loss Ratio To Measure Health Plan
Performance - This accounting tool was never intended to measure
quality or efficiency," by James C. Robinson. Health Affairs.
July/August 1997

ABSTRACT: "This paper examines the use and abuse of the medical loss
ratio in the contemporary health care system and health policy debate.
It begins with a survey of the ways in which the medical loss ratio
has been interpreted to be something it is not, such as a measure of
quality or efficiency. It then analyzes key organizational features of
the emerging health care system that complicate measures of financial
performance, including integration between payers and providers,
diversification of payers across multiple products and distribution
channels, and geographic expansion across metropolitan and state
lines. These issues are illustrated using medical loss ratios from a
range of nonprofit and for-profit health plans. The paper then
sketches a strategy for improving the public?s understanding of health
plan performance as an alternative to continued reliance on the flawed
medical loss ratio. This strategy incorporates data on structure and
process, service quality, and financial performance. "

(Note that I only included the medical loss ratios from the following chart)

EXHIBIT 1: Medical, Administrative, And Profit Ratios From Selected
Health Plans, 1994-1995

Blue Cross and Blue Shield       Medical loss ratio
===========================      ====================
Central New York                 95.1%
Colorado                         64.0
Georgia                          91.3
Nevada                           58.4

Kaiser Foundation Health Plan    Medical loss ratio
=============================    ====================
California                       96.8
Georgia                          76.2
North Carolina                   98.7
Colorado                         82.7

WellPoint Health Networks        Medical loss ratio
==========================       ===================
Blue Cross of California         93.5
CaliforniaCare                   73.0

Aetna Health Plans               Medical loss ratio
==================               ===================
California                       83.2
Illinois/Indiana                 78.1
Illinois/St. Louis               47.2
Massachusetts                    98.1
Delaware                         97.7

CIGNA Healthcare                 Medical loss ratio
=================                ====================
California                       83.2
Illinois/Indiana                 78.1
Illinois/St. Louis               47.2
Massachusetts                    98.1
Delaware                         97.7

MetraHealth Care Plans           Medical loss ratio
=======================          ===================
Chicago                          108.4
Illinois                         74.3
St. Louis                        69.0

CareAmerica                      Medical loss ratio
==============                   ===================
Southern California              78.3
Life Insurance                   110.0

FHP Health Care                  Medical loss ratio
================                 ===================
California                       83.8
Illinois                         81.0
Colorado                         81.7
New Mexico                       82.1
Utah                             89.0

SOURCES: California Medical Association, Knox-Keene Health Plan
Expenditures Summary, FY 1994-95 (San Francisco: CMA, February 1996);
Weiss Ratings, Which Health Insurers Give You the Most for Your Money?
Which Give You the Least? (Palm Beach Gardens, Fla.: Weiss Ratings,
July 1996); and Illinois State Medical Society, Illinois Health
Maintenance Organizations (Chicago: Illinois State Medical Society,
November 1996).


Medical loss ratios vary by the insurance segment as evidenced by the
following table in:
"The Geography Of Health Insurance Regulation." Health Affairs, March/April 2002

See "EXHIBIT 1 - Characteristics Of Insurance Market Segments." 

Large group market  -  85-95% medical loss ratio

Small Group - 75-85% medical loss ratio

Individual - 60-75% medical loss ratio


Georgian Insurance Market and State Regulation (2005)

See Section - "Loss Ratio by Classes of Insurance in 2005."

Class of Insurance - Medical

Loss Ratio (Claims/Premium income) % - 62.6


New York State Insurance Department:

"Filing Guidelines for Insurance Law Section 4308(h) Loss Ratio Submissions."

(11)"Healthy New York" means standardized health contracts for
qualifying small employers and individuals, issued pursuant to
Insurance Law section 4326.

(12)"Loss ratio" means the ratio of direct claims incurred to direct
premiums earned, expressed as a percentage.

(13)"Maximum loss ratio" means a loss ratio of 105 percent, except
that individual non-standardized direct payment contracts that had a
loss ratio of greater than 105 percent in 1994 shall not have a
maximum loss ratio assigned to them in subsequent years? filings.

(14) "Minimum loss ratio" means:

(i) For small group and small group remittance contracts, a loss ratio
of 75 percent;

(ii) For individual direct payment contracts, a loss ratio of 80 percent; and

(iii) For Healthy New York contracts, a loss ratio of 80 percent.


From "Insurance Company Health Plans Make More Money, Pay Less in
2005." Chicago Sun Times. Sept. 2006.,CST-FIN-health27.article

Whereas 10 years ago many plans had medical-cost ratios in the high
80s or 90s, now the highest percentage among large, publicly traded
health insurers is Health Net, at 83.9%. Aetna, which had a
medical-cost ratio well into the 90s when CEO John Rowe, MD, took over
in 2000, recorded a ratio of 76.9% in 2005, Dr. Rowe's final full year
before his retirement. That was the lowest medical-cost ratio for the
nation's largest publicly traded plans. Medical-cost ratios for 2005
(Source: Company 10-K, year-end filings with the Securities and
Exchange Commission):

    * 76.9% - Aetna
    * 82.3% - Cigna
    * 83.9% - Health Net
    * 83.2% - Humana
    * 78.6% - UnitedHealth Group
    * 80.6% - WellPoint


The following article has some information relative to insurance
regulations and medical loss ratios in New York state, and a chart
from a Wellpoint case study.

Read "Treating the Symptom Instead of the Disease," By Tarren Bragdon.
HealthPoints, March 2006


The Healthleaders Interstudy might be of interest:

"2006 Looking Like Another Strong Year For Health Plans," By Jane
DuBose. Healthleaders.


"If there was any negative theme from first-quarter 2006 conference
calls by health plan CEOs, it was higher medical cost ratios at their
companies. Interestingly, the executives found many ways to explain
the increases. They cited everything from timing of account renewals
to drug costs by Medicaid enrollees as reasons for the rising ratios.
The closely watched cost ratios increased at seven of the 13 publicly
held firms, decreased at five of them and stayed the same at one -
Humana Inc. Despite the increases, however, most plans turned in
better bottom-line performances. Nine of the health plans posted
increased profits while four saw net income sag. The greatest gain
belonged to Medicaid operator AMERIGROUP Corp., with an 83 percent
profit surge, while the largest percentage drop belonged to Humana,
with a 27 percent decline.

"Medical cost ratios - which measure the portion of premium revenues
spent on medical costs - ranged from a low of 77.5 percent at
HealthSpring Inc. to a high of 87.3 percent for CIGNA HealthCare."

Read further...


 I hope this information is helpful. Please let me know if I can
clarify anything further for you. I will help if I can!



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