New Report Spotlights Health Insurance 'Ripoff Rate'

The three largest health insurers in Pennsylvania spend less than 90% of insurance premiums on actual health care costs, according to new data released today by PHAN and Health Care for America Now Pennsylvania (HCAN-PA).

Nationally, private insurers currently spend, on average, only 81% of premiums directly on health care costs, according to a study by PricewaterhouseCoopers. By comparison, the public Medicare program spends about 97% of its premium revenue on health care-related costs.

In Pennsylvania, up to 18 cents on every dollar of health care premiums is spent - not on doctors' visits, medication, and emergency procedures - but on CEO compensation, lobbying, marketing, and advertising.

The data released today shows that in Pennsylvania, Highmark BlueCross Blue Shield collects more than $11 billion in premiums, but spends only 87.9%, $9.7 billion, on health care costs, keeping more than a billion dollars for its surplus and non-health care-related spending. The “Ripoff Rate” – which kicks in when insurance companies spend less than 90% of premiums on health care-related costs — for Highmark Blue Cross is 2.1%.

Independence Blue Cross (IBC) collects more than $11.4 billion in premiums but spends only 88.3%, less than $10.1 billion on health care. The "Ripoff Rate" for IBC is 1.7%.

And the nationwide record of the third largest insurer in Pennsylvania, Aetna, is even worse. It spends only 81.5% of the $25.5 billion it receives in premiums, or $20.8 billion, on health care. It’s "Ripoff Rate" is 8.5%.

PHAN is urging Congress to adopt Senator Al Franken’s recently introduced “Ensuring Value for Premiums” amendment, requiring private insurance companies to spend 90% of their revenue from premiums on health care-related costs.

The amendment would require that private insurance companies give their customers refunds on any non-health care-related costs over 10% of the premium. Consumers would see a decrease in premium costs — as well as an increase in the amount of coverage provided — as insurance companies would seek to avoid paying a refund.

In Pennsylvania, the rebate required by the amendment would mean $231 million returned to Highmark BlueCross Blue Shield customers and $194 million returned to Independence BlueCross Blue Shield customers and a somewhat smaller amount returned to Aetna customers.

Read the report here.