EXCLUSIVE: US Consumers May Be Misled About How Much Insurers Actually Spend On Medical Care, Report Suggests

Some health insurers may be misleading consumers about how much they are actually spending on medical care, a new Insurance Watchdog Coalition report first obtained by The Daily Caller News Foundation suggests.

Medicare Advantage (MA) plans reported a Medical Loss Ratio (MLR) of nearly 90% in 2023, according to IWC’s report. Per their own filings, medical and prescription-drug claims comprised 82.5% of insurers’ total revenue, below the 85% federal requirement and $36 billion less than the figure they initially reported, the report alleges.

The Affordable Care Act (ACA) of 2010 — commonly known as Obamacare — mandates that insurers submit data on the amount of premium revenues spent on clinical services and quality improvement, also known as MLR, according to the Centers for Medicare and Medicaid Services (CMS). The ACA also requires health insurance companies to spend at least 80% to 85% of premium dollars on medical care, per CMS.

“Current MLR rules let plans count things that are not medical care as if they were,” the report claims. “Administrative costs — including portions of prior-authorization systems — count as ‘quality improvement.’”

Health insurers can also count benefits such as gym memberships and cash cards for everyday expenses as “medical spending,” per the report.

“For years, policymakers thought Medical Loss Ratio (MLR) meant insurers paid 85% of every dollar on healthcare,” IWC Executive Director Mark Merritt told the DCNF in a statement. “But insurers rigged the system, counting billions in overhead, marketing and other costs as ‘medical’ expenses. We need real transparency to make sure health dollars go to patients — not just insurers’ bottom line.”

IWC’s analysis also recommends that CMS should require health plans to “report what they pay providers, PBMs, and other businesses they own — in dollars, by affiliate — as a separate line in the MLR filing, and compare those payments to what independent providers are paid.”

The MLR figures included in IWC’s report were computed using data from CMS’s Contract Year 2023 Part C/Part D Medical Loss Ratio Public Use File. The figures do not include payments to affiliated providers, according to IWC.

The report’s release comes as many lawmakers have been calling for greater transparency across the U.S. healthcare system. In July, Republican Texas Rep. Nathaniel Moran unveiled legislation that would require insurers to publicly disclose how much of their total revenue goes toward patient care versus overhead.

“Transparency and accountability must be at the center of reforming our healthcare system,” Moran said in a July 15 statement, adding that his bill “seeks to double down on that effort by pulling back the veil legislatively and requiring more information be made public about how Medicare Advantage dollars are spent.”