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Insurers spend little from premiums on quality improvement

A new report says only $29 was spent per enrollee on efforts concerning patient safety, hospital readmissions and medical errors.

By Marcia Frellick amednews correspondent — Posted April 10, 2013

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Insurers spent an average of less than 1% of the premiums policyholders paid in 2011 on improving health care quality, according to a new study by the Commonwealth Fund.

Total spending on direct quality improvements was $2.3 billion ― an average of $29 per enrollee — for measures that fall within Centers for Medicare & Medicaid Services guidelines for improving outcomes and patient safety, preventing readmissions and reducing medical errors.

The Affordable Care Act requires insurers to spend at least 80% of premiums (85% for large insurers) on medical claims and quality improvement, as opposed to administrative costs, or pay rebates to consumers.

The first year for the required reporting of the breakdown, or medical-loss ratio, was 2011. Insurers overall paid more than $1 billion in rebates for not meeting the minimums.

The findings in the report varied greatly by type of insurer (link). Health plans owned or operated by a health care system or group of physicians spent a median $37 per member, compared with $23 spent by “non-provider-sponsored” plans. Nonprofit plans invested $35 per member, compared with a median $19 spent by for-profits.

“The for-profit insurers are spending considerably less than the nonprofits, suggesting there's not a strong profit motivation as of 2011 to invest in quality,” said study lead author Mark Hall, a professor at Wake Forest University School of Law in Winston-Salem, N.C. “You also see provider-sponsored plans spending considerably more than the average, which suggests plans that are governed by providers view it more as their mission or may be in a better position” to spend the money to improve quality.

Health plans disagree

America's Health Insurance Plans, which represents health plans, criticized some of the conclusions of the report (link). AHIP said the 80% cap is arbitrary and the scope of quality improvements doesn't take into consideration positive contributions by insurers such as providing resources to help cut fraud, developing partnerships to reward quality and credentialing health care professionals to ensure high-quality care.

Hall acknowledged the CMS constraints in defining quality measures, but he questioned how much some of the measures AHIP mentioned would add to the total spent on improving quality.

“We're looking at the bulk of the spending and the aspects of the spending that most address quality. Admittedly, it doesn't turn over every single stone,” Hall said.

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