I've been tracking nine companies expansion into Medicaid and Medicare since 2009, and some as far back as June 2008. The information is taken from their quarterly and annual SEC filings.
The nine companies tracked were Aetna, Amerigroup, Centene, Coventry, Humana, Molina, Wellcare, Wellpoint and UnitedHealth Group. Federal Medicare and State Medicaid contract business generated more than $111 billion in 2010 premium revenues to these nine companies.
A health Insurance company's standing on Wall Street and with its stockholders is based on keeping an important business indicator as low as possible. Called the Medical Loss Ratio (MLR), it stands for the percentage of each monthly insurance premium received that is spent on actual medical costs. These nine companies reported MLRs between 79.4% (Coventry) and 87.5% (Aetna). That means they saved shareholders almost $20 billion in operating profit from Medicaid and Medicare premiums.
State and federal contracts pay the companies based on intricate risk levels calculated for each individual "policyholder." They may be paid $5,000 a month for a senior citizen, $12,000 a month for my daughter, or as much as $29,000 a month for someone meeting the highest risk criteria.
When a state-operated Medicaid program that pays actual bills (called fee for service) is suddenly replaced by for-profit "managed care" plans, each "policyholder's" individual budget has to be cut by that 13% to 20% margin that now goes straight to company bank accounts.
Most Medicaid contracts either do not stipulate an MLR, or when they do, companies can easily defraud Medicaid by pumping expenses. The Affordable Care Act was supposed to be imposing an 85% MLR on Medicare and 80% or 85% on employer-paid policies. An Oppenheimer analyst calculated six companies alone (UnitedHealth, Aetna, Cigna, Coventry, Wellpoint and Humana) would have owed about $1.9 billion in rebates just to commercial and individual policyholders.
The Oppenheimer study looked at state insurance records as well as SEC filings. They found that average MLRs differed widely across the country: two different Wellpoint subsidiaries in Colorado spent only 33.2 percent and 53 percent respectively on actual patient care. A UnitedHealth program had an average MLR of about 63 percent.
A Florida investigation into a single Medicaid contract that actually stipulated an 80% MLR found all eight Medicaid HMO providers (including Wellcare, Amerigroup, and Humana) owed the state refunds.
The lower the MLR, the more medical services are cut.
Back in January, the Children's Disability Rights Education Association launched two surveys to gather information on how well states are following federal Medicaid regulations specifically directed to protecting children with disabilities. While the initial survey sample is small (41), its unanimity is glaring: all 41 respondents (forty of them family and caregivers), coming from 19 states, have been the victim of one illegal Medicaid action or another.
This is what happens when profit-based companies take over Medicaid contracts and have to slash services to please stockholders and Wall Street.
CDREA's article on the survey details the impact on family life that these anonymous financial decisions can have.
If you believe that life and death medical decisions for medically fragile children, the elderly, and adults with disabilities should not be made by for-profit health insurance companies, please sign our petition.
If you believe federal and state tax dollars destined to provide care for the elderly, and children as well as adults with disabilities should not be diverted to private corporate CEO salaries and profits, please sign our petition.
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