1993 - 95 cents out of every dollar in premiums paid to claims, down to 80cents now (more:)

[The Straight Story]

Why Insurance Companies Deny Health Care

What is the discussion around these kinds of issues in these companies? Do these sets of data get reported to people at the executive level?

Yes. The executives always need to know how much is being paid out in claims because it affects what’s called the ‘medical loss ratio,’ which is reported when the companies report their quarterly earnings. Investors are always looking to the insurers to keep that medical loss ratio down. That is the measure of how much of the premium dollars are being paid out in claims. If it’s 80 percent, for example, it means that 80 cents out of every dollar is paid out in claims. As recently as 1993, 95 percent of every premium dollar was paid out in claims. Now it’s down to about 80, so insurance companies are doing a lot of things to avoid paying those claims.

Did you have a target amount you wanted to pay out over a particular period of time?

Well, it depends. Several years ago, the medical loss ratio at Aetna was something like 77.9 percent, and then the next year, the medical loss ratio had gone up to 79.5 percent. Investors were very upset with that kind of increased medical loss ratio and the stock for that company declined sharply. I’ve seen the stock values for companies that disappoint Wall Street in the medical loss ratio declining 20 percent in a single day. So you look at the benchmarks of what the medical loss ratio was for the same period a year ago, and for the previous three months.

Did you feel that Wall Street pressure on a daily basis?

Absolutely. In corporate communications, I didn’t feel it as much as some of the line employees who have a direct ability to influence the medical loss ratio like the medical directors and the people who handle the claims. And the pressure is on all employees. It’s always in the back of your mind: ‘I need to make sure that I don’t do something that causes the company to miss Wall Street’s expectations.’

http://news.newamericamedia.org/news/view_article.html?article_id=33655d70ff9cd7509f16bfd2bfbafa9f

[The Magistrate]

1. An Excellent Account, Sir, And Why The Insurance Companies Must Be Broken

[napi21]

2. That's the same thing that destroyed the housing market! The belief that things willk ALWAYS be

higher & better that before...FOREVER! Those houses didn't keep increasing in value forever and the idiots in the market MUST realize that no company can always best last year on numbers like that! If they were judged on their IBT or number of insureds or even cents per share, then it would make sense.

[The Straight Story]

3. late night kick(nt)