Question
Will the candidate clamp down on how much insurance companies spend on non-medical costs so that Americans get the best value for their premium dollars?
The Issue
Currently, health insurance companies are generally free to decide how much of each dollar that they collect in premiums will be spent on health care versus how much will go toward marketing, paperwork, and profits. As a result, U.S. health insurance companies spend more than $300 billion each year on non-medical costs.8
The cost of insurance is rising, and more and more working Americans are finding themselves without health coverage. At the same time, insurance companies are actually spending a smaller share of premiums on health care. Between 2000 and 2007, the average share of premiums that the top five U.S. health insurance companies spent on medical services dropped from 84.8 percent to 80.1 percent.9 This means that 20 cents of every dollar collected in premiums last year by our country’s largest insurers was spent on things other than health care.
Appropriate regulations that hold insurance companies accountable for how they spend your premiums can lower the cost of premiums, making health care more affordable for all Americans. Enacting rules that set a minimum percentage of premium dollars that insurers must spend directly on health care would be one step toward making the insurance market less costly for working families.
The Positions
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Senator McCain: Senator McCain’s health care plan does not create any rules that require insurance companies to spend a certain percentage of premiums on health care. His plan permits the sale of insurance policies across state lines, which allows insurance companies to elude any state rules that currently set a minimum percentage of premiums that insurers must spend on providing health care. |
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Senator Obama: Senator Obama’s health care plan creates a new rule that sets a minimum standard for the percentage of premium dollars that insurance companies must spend on providing health care to consumers. |
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Footnotes
8 According to data from Steffie Woolhandler, Terry Campbell, and David Himmelstein, insurance companies spent nearly $300 billion on non-medical costs in 1999. As health spending has increased substantially since 1999, and as there is no sign that non-medical spending as a share of premiums is declining, the amount that insurers spend on non-medical costs today is likely to be substantially higher than $300 billion per year. Steffie Woolhandler, Terry Campbell, and David Himmelstein, “Costs of Health Care Administration in the United States and Canada,” New England Journal of Medicine 348, no. 8 (August 21, 2003): 768-775.
9 Calculations are based on the 2000 and 2007 SEC form 10-K for the five U.S. insurers with the highest revenues as reflected in the 2007 Fortune 500 survey and are on file with Families USA. |
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