"The Driver Of Profitability."

Lost in the Joementum-dominated health-reform coverage is consideration of the fate of some very good policy ideas. Requiring insurance companies to spend a greater percentage of premium dollars on health care -- otherwise known as the "medical loss ratio" (MLR) -- would pump billions more into medical care. But you can thank the CBO for probably wiping any possibility of this off the table.

The effort to mandate a higher MLR is being led by Sens. Jay Rockefeller and Al Franken, who have proposed an amendment that would force insurers in group plans to spend at least 90 percent of each premium dollar on care and 85 percent for individual plans. Instructing insurers to spend more on real care instead of administrative costs, advertisements, and profits would seem like a simple solution. However, the CBO just reported that the amendment would mean that "all payments related to health insurance policies" would be "recorded as cash flows in the federal budget." Even though forcing insurance companies to spend more on care wouldn't cost the federal government any extra money, it would essentially be recorded as such, given the government's regulatory role. So with the CBO artificially inflating the price tag on the Rockefeller/Franken amendment to politically unsavory heights, it appears fairly unlikely to pass.

And while the CBO might sound the death knell, another major roadblock to increasing the MLR is the sloppy reporting on the topic. In a recent Reuters piece, reporters Susan Heavey and Lewis Krauskopf exclusively quote investors and insurance industry spokesmen to attack any effort to increase the MLR. Defending industry. They also report this:

Analysts say private insurers currently spend roughly 80 to 85 cents on the dollar on patient care but that has fluctuated over the years.

This is actually a modest lie. Insurance industry representatives often cite an even higher MLR: 87 percent. According to a rather revealing study from the Senate Commerce Committee, the actual average MLR for individual plans is 74 percent, 80 percent for small group plans, and 84 percent for small employers. The same investigation uncovered that two health insurance giants, Aetna and CIGNA, had each fudged their MLR numbers to government regulators by about $5 billion.

While insurance industry types and their allies love to tell the press and the public that an industry-dictated MLR is good for consumers, you can find more candor on investor calls. In a briefing to investors in November, a WellPoint executive exclaimed that a declining MLR -- which he referred to as the "benefit expense ratio" -- "really is the driver of profitability."

--Lee Fang