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Health Insurers Want Anti-Fraud Activities Exempted From MLR

Health insurance executives who met at the White House last week to mark their contributions to fighting fraud told the Obama administration that the cost of those efforts should not be counted toward profit limits that were imposed under the 2010 U.S. healthcare overhaul
August 1, 2012

Health insurance executives who met at the White House last week to mark their contributions to fighting fraud told the Obama administration that the cost of those efforts should not be counted toward profit limits that were imposed under the 2010 U.S. healthcare overhaul. Under the Affordable Care Act, insurers can keep 20 percent of revenue from customer premiums for profit and administrative costs, and the rest must be spent on medical care or rebated. Insurers including UnitedHealth Group Inc. said the government should change the rules so the companies’ anti-fraud efforts can be classed as medical costs. Changing the rule “would make it easier for the industry to do the most that they can,” a UnitedHealth executive said in a telephone interview after leaving the meeting in Washington, adding, “Anything we do to prevent fraud counts as administrative costs.”

The health insurers want anti-fraud activities exempted from the same restrictions in which agent and broker compensation have been caught up. The federal Department of Health and Human Services (HHS) says agent and broker commissions must be calculated as administrative expenses within the medical loss ratio (MLR), while agents want it calculated outside of it. The upshot has been that many agents have seen their compensation from health insurers decrease by as much as 50 percent since the MLRs went into effect Jan. 1, 2011, according to the nonpartisan Government Accountability Office (GAO).

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