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Some Health Insurers Fudged Medical Spending Numbers: Researchers

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What You Need to Know

  • The researchers used ACA medical loss ratio data from 2011 through 2015.
  • The magnitude of the claim exaggerating was less than what the researchers had expected.
  • The researchers like the idea of regulators using more cash clawbacks.

About 14% of U.S. health insurers suppressed their Affordable Care Act medical loss ratio rebate bills before 2016 by exaggerating how much they spent on health care, according to a new accounting research paper.

But this fudging the numbers problem was smaller than health insurance companies had estimated, and insurance regulators have good tools they could use to control any data fudging, the researchers say in the new paper.

In 2013, it was estimated that 20% of health insurers were fudging health spending numbers to cut rebates.

The researchers — Evan Eastman of Florida State University, David Eckles of the University of Georgia and Andrew Van Buskirk of Ohio State University — are on track to have their paper appear in The Accounting Review.

MLR Rebate  System

Former President Barack Obama signed the two bills in the Affordable Care Act package in 2010.

Some of the ACA provisions that people think of as “Obamacare,” such as the provisions that created the ACA public health insurance exchange system, took effect in 2014.

Other provisions, such as the one that created the ACA medical loss ratio (MLR) program, took effect quickly.

The MLR provision requires health insurers spend a minimum amount of their revenue on health care, fraud detection and quality improvement efforts or else send cash back to the customers. The minimum MLR ratios are 85% for large group plans and 80% for individual and family policies and small group plans.

Federal regulators now publish company-by-company MLR rebate program data every year.

Research Methods

The researchers analyzed health insurers’ tendency to overestimate health care spending, to reduce rebate spending, by comparing insurers’ original claim spending estimates and the revised figures the same insurers put in later minimum MLR filings in later years.

The revised figures filed in later years tended to be lower in later years.

About 49% of all of the insurers in the data overestimated health care spending, the researchers around. However, 63% of for-profit, publicly-traded insurers, or those with a stronger incentive to increase their earnings, appeared to be overestimating health care spending, the researchers report.

“Thus, we infer that approximately 14% percent of firms with the incentive to manipulate do so,” the researchers write. “We view this frequency as informative, considering that prior research is largely silent on the estimated rate of accounting manipulation in general.”

The researchers say regulators should be able to control any problems with bias in health care spending reporting, by clawing back any rebate savings when insurers appear to be overestimating their spending to decrease rebate payments.

(Image: Shutterstock)

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