Medical insurance companies spend less than 1% of your premium on improving the quality of care you receive

Part of Obama Care requires that medical insurance companies use at least 80% of the premium they charge you to pay for your medical care and for quality improvement expenses. If they don't, they have to refund you the difference.  This requirement means that the government has to collect data from medical insurance companies so that the companies can prove they spent your premium for your care and to improve the quality of your care.  This data is freely available to anyone who wants to evaluate it.

Mark Hall and Michael McCue did just that and they present their analysis in a Commonwealth Fund Issue Brief. The data for the analysis came from those medical loss ratio (MLR) forms filed with Centers for Medicare and Medicaid Services (CMS)  for the year 2011 and the authors limited their analysis to insurers with enrollment of 1,000 or more people. 

The authors share some interesting summary statistics from other CMS reports including a list of insurance companies owing rebates, and a nice summary of average rebate by state. Collectively, insurers had to pay out over 1 billion dollars in rebates for the 2011 year, reducing administrative expenses and profit margins by that amount.

But one of the authors' most interesting findings is how the insurance companies spend your premium. They present this data in a pie chart. I recommend you take a look at Exhibit 1 in their report. I've also put that data into a bar graph. Can you find the expenditure on quality improvement? Click on the graph to see the full image.

Created from data provided in Exhibit 1 of Commonwealth Fund pub 1671, Vol 14, 2013

The authors report that insurers spent $29.04 per person on quality improvement.   Quality improvement includes such things as health information technology expenses ($4.88 per person) as well as improving outcomes ($14.92 per person), reducing hospital readmissions ($2.55 per person) , patient safety ($2.94) and wellness activities ($3.74).

This is the first year such data is available. It will be interesting to monitor to see if medical insurers choose to invest in improving the quality of the care they purchase for you.