Health insurers cooking books to game reforms

Insurance companies couldn't defeat reform legislation, so now they're re-working their books to avoid its impacts.

"Some of the largest U.S. health insurers are changing their accounting practices to book administration costs as medical costs in an attempt to circumvent new industry reforms, according to a U.S. Senate panel's report released on Thursday," Reuters reports.

The move appears to be an attempt to avoid the law's stricter standards for medical-loss ratio, implemented as a way of cutting waste. The law requires 80 to 85 percent of every premium dollar, depending on the plan, to be spent on medical costs.

By logging administrative expenses as medical, insurers can retain more of their income as profits.

The Senate Commerce, Science and Transportation Committee noted that WellPoint, Inc., one of the largest insurance companies, "has already 'reclassified' more than half a billion dollars of administrative expenses as medical expenses."

WellPoint did not deny or affirm the charge when Reuters inquired, and several other insurers declined to comment.

After the law passed, some insurance companies initially considered exploiting a loophole that allowed them to continue denying coverage to children with pre-existing conditions until 2014, but eventually buckled under pressure from the White House and agreed not to block efforts to bridge the gap.

Although the stronger regulations stand to cut into insurer profits in an effort to protect consumers from dodgy practices and denial of care, the industry stands to gain in a different way.

The legislation will provide private insurance companies with over 30 million new customers after the subsidies and mandates are implemented in four years, according to the Congressional Budget Office.