Major health insurance companies are integrating care provider entities increasingly integrated into their portfolios that include home care delivery, using provider arms to inflate care prices and avoid federal regulations.
PayViders, including UnitedHealth Group (NYSE: UNH), Elevance Health (NYSE: ELV), and CVS Health (NYSE: CVS), and others, take advantage of loopholes that can hide price increases and avoid potentially expensive rebellions for consumers.
The healthcare loss ratio measures the percentage of premiums health insurance companies spend on healthcare and quality improvement initiatives, as opposed to overhead costs and profits. Affordable Care Act requires insurers to maintain at least 80% MLR in small groups and individual markets. That is, 85% in the large group market. Otherwise, the insurance company will have to pay the consumer a rebate.
Since these minimum requirements became effective in 2012, approximately $13 billion has been issued in rebates. The author of the article said this highlights the incentives of insurers to minimize such payments.
These rebates encourage PayViders to concentrate their spending on the practices of their partner providers.
“This dynamic reveals limitations on the MLR rules,” the article author wrote. “If insurers are providers too, there is less transparency about how healthcare dollars are actually allocated. Vertical integrated insurance companies and provider entities can artificially inflate the prices of health services, and exacerbate the country's health affordability issues.”
Payviders' strategy has also led to an increase in Medicare Advantage's unclaimed payments, the authors write. For example, Oregon reports that the increase in unsolicited payments is primarily due to a significant shift in UnitedHealthcare's bill payments that do not spend on spending through Optum.
“These trends are not limited to the benefits of Medicare,” the author writes. “Other major insurers, such as UnitedHealth and Athance and Aetna, operate in multiple markets, raising concerns about similar dynamics in the commercial market.”
To avoid the negative effects of these strategies, the article authors recommend stronger surveillance. This is also recommended by lawmakers.
Senators Elizabeth Warren (D-MA) and Mike Brown (R-IN) urged the Department of Health and Human Services (HHS) (HHS) (OIG) in 2023 to assess the extent to which vertical integration increases costs and insurers can bypass MLR requirements. Other lawmakers have made similar demands regarding the benefits of Medicare.
The authors recommend that policymakers need to assess whether regulatory tools such as MLR are appropriate, and the status must apply greater scrutiny of vertical integration arrangements, the authors wrote.
“Dealing with these issues is essential to maintaining the integrity of cost containment efforts and ensuring that health care is spent on providing meaningful care,” they write.
