Lack of accountability. Unnecessarily high premium rates. Health care costs spiraling out of control. These are just some of the sentiments the general population has about the United States' health care system.
Health care providers are quick to point out that health care costs are rising because of increased consumption and usage by consumers. Insurance companies claim that premium rates are rising to better cover the growing costs of health care providers due to a 'sicker' population. And, consumers quickly blame providers and insurance companies for taking advantage of the growing needs of the aging U.S. population just to turn a comfortable profit. No matter where you look, it is easy to jump into any of these camps of thought. But it is unfair and inaccurate to lay blame on one sole group for the complex issues that plague the health care system.
The Affordable Care Act takes steps to increase regulation across the health care system, attempting to lower costs and increase both quality and health outcomes. One of the key provisions, the Medical Loss Ratio (MLR) provision, aims to increase accountability and regulation of insurance companies by introducing federal mandates with room for stricter state-wide regulations. The MLR provision limits the percentage of premium revenues that insurance companies can spend on overhead, advertising, and other non-claims-based expenses. As such, it requires all insurance companies spend 80% of premium revenues on health care claims and quality improvement, thereby limiting administrative, overhead, and advertising expenses to 20% of premium revenue.
Let's take a quick look at some numbers. In 2010, less than half of the country's insurance companies in the individual insurance market met the provision's 80/20 mandate. While this is a very low percentage, let's give credit where credit is due. 70% of insurers in the small group market and 77% in the large group market met the MLR provision. However, all these numbers are below the 80% minimum mandated by the MLR provision. There's still room for growth and streamlining within insurance companies.
Insurers should begin to look at more innovative advertising and community engagement strategies. Blue Cross Blue Shield of North Carolina (BCBSNC) provides a clear example of championing such efforts. The insurer recently developed a collaboration with the University of North Carolina's Health System (UNC Health Care) announcing plans to establish a new primary care physician practice, Carolina Advanced Health. This collaboration provides two key benefits: the promotion of wellness and 'one-stop health care access' for individuals, as well as an opportuntiy for BCBSNC to increase brand recognition and market share in the state. BCBSNC has also pushed forward with a unique customer relations strategy, Let's Talk Cost, which aims to open up the interaction between the company and plan holders in an effort to promote cost transparency. These are just two examples of important steps that insurers are taking.
There is a push through the Affordable Care Act to ensure insurance companies demonstrate premium dollars are, for the most part, going back to the consumers through claims and quality improvement programs. However, regulations are not enough. Insurance companies need to develop innovative and cost-effective approaches to re-engage the population in a discussion about health care costs and transparency.
It would be naive to say that the problem lies in insurance companies alone. Health care providers need to work with insurers to better negotiate reimbursement rates to keep overall costs down, and consumers need to better understand the importance of preventative care, wellness, and quality outcomes. Until all three of these can find room for overlap, the United States will continue its upward spiral in terms of health care costs. The MLR provision of the Affordable Care Act takes a strong step forward, but more is needed to support this provision's long-term success in the complex health care system.