Less Than 1% of Health Plan Premiums Spent on Quality

John Commins, March 22, 2013

Health insurance providers have spent less than 1% of the premium dollars they collected from policy holders on quality initiatives, a Commonwealth Fund study said.

Insurers spent $2.3 billion on quality improvement activities in 2011, an average of about $29 per policyholder, the report said.  Spending on quality initiatives is mandated in a provision of the Patient Protection and Affordable Care Act.

"You have to have a little bit of a caveat here because this regulation was just starting in 2011. They're dealing with coordinated care and it is in the embryonic stages here of how they are going to allocate those costs," says study coauthor Michael McCue of Virginia Commonwealth University.

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"They have to be able to accurately measure all of these various activities and allocate those costs. The big plans, back when this data was reported, were still in the planning stage of how they were going to be measuring quality of care activities. The majority of the dollars paid out in premiums are going towards medical expenses. These are activities that help promote quality of care."

The PPACA's medical loss ratio rule requires insurers to spend at least 80% or 85% of premiums on medical claims and quality improvement activities, or else pay rebates to consumers. To calculate medical loss ratios, the report, Insurers' Medical Loss Ratios and Quality Improvement Spending in 2011, linked quality improvement expenses to activities that are likely to improve health outcomes, prevent hospital readmissions, improve patient safety and reduce medical errors, and increase wellness and health promotion.

Insurers spent 17% of the total quality improvement spending on health information technology upgrades, 51% on improving health outcomes, 9% on preventing hospital readmissions, 10% on patient safety, and 13% on wellness, the study found.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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