Aetna Overstated Spending on Patient-Care Category

By Avery Johnson
Wall Street Journal
December 8, 2009

Aetna Inc. spent less money on patient care for some small businesses than it originally reported in regulatory filings, according to a Senate committee scrutinizing insurers' profits as Congress pushes to overhaul the health-care system.

The Senate Committee on Commerce, Science and Transportation launched an investigation last summer into the percentage of premiums insurers spend on medical care versus profits and other administrative expenses. That percentage, known in the industry as "the medical-loss ratio," is watched closely by detractors who say insurers take too much money from the system in profits.

In a statement Monday, the committee said Aetna overstated by $4.9 billion the amount of money it spent on patient care for small businesses. As a result, the insurer's medical-loss ratio for small businesses was 79%, not the 82% Aetna initially reported, it said, drawing attention to a correction that Aetna had made to its filings last week.

Aetna said the error was a simple mistake, and that it proactively filed an amended report to the National Association of Insurance Commissioners on Dec. 2 to correct it. In its original filing, Aetna reported the $4.9 billion as having come from large businesses, instead of small businesses.

"We have alerted our staff to the errors…to prevent this from happening again," said Aetna spokeswoman Cynthia Michener.

America's Health Insurance Plans, the industry's trade group, has said that less than one cent of every dollar spent on health care goes toward profits. But critics have said the amount is in fact much higher.

"Health insurance companies have a duty to provide accurate financial information both to consumers and to their regulators about how much money they actually spend on health care, and how much they spend on profits," said Sen. John D. Rockefeller IV (D., W.Va.), who chairs the panel. "Unfortunately, it looks like Aetna and other health insurers haven't been taking this duty very seriously."

In August, the panel sent letters to 15 insurers asking them to break out by state and market segment their medical-loss ratios. In quarterly financial filings, the companies tend to release one all-inclusive medical-loss figure, but the panel wanted to find out if companies spent less on care for individuals and small businesses. When many companies declined to break out the ratios, the panel turned to filings made to state regulators. Last month, the committee chastised Cigna Corp. for mislabelling $5 billion in premiums.

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