WASHINGTON, D.C.—John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation, sent a letter yesterday to H. Edward Hanway, the CEO of CIGNA, raising serious questions about the way his company spends consumers’ health care premium dollars. The letter details newly released information about the percentage of consumers’ premium dollars that insurance companies spend on medical care, a measure known as the “medical loss ratio.”
“The American people and I are asking a serious question and one that deserves a straight answer – why are health insurance costs going up each year?” Rockefeller asked. “Health insurance companies claim to be good corporate citizens. If this is true then they need to tell us how they are spending their customers’ money. Are they spending it to make people well when they are sick and keep them healthy? Or is the money they charge going to profits, to executive salaries, and to figuring out how to deny care to people when they really need it.”
“The data released in this letter reveals that while health care costs are spiraling upwards, consumers are paying more and getting less, and the health insurance industry doesn’t want anyone to know what they are up to. The American people deserve to hear the truth. CIGNA’s apparent failure to accurately report its business activities is just another disturbing example of why we need more transparency and accountability in the health insurance industry. I am going to continue fighting the big health insurance companies as we move health reform to the Senate Floor and Conference and I will not stop until all Americans get a fair shake.”
The letter to CIGNA explains that in its filings with the National Association of Insurance Commissioners (NAIC) and with state insurance commissioners, CIGNA has apparently failed to accurately account for as much as $5 billion worth of health insurance it sold in the commercial group insurance market in 2008. The company’s failure to accurately report this information not only appears to violate state laws; it also undermines the efforts of policymakers, consumer advocates, and regulators to determine whether consumers and small businesses are getting a fair value for their health insurance premium dollars.
The letter also summarizes other critical information about insurance company practices and medical loss ratio data that the Commerce Committee has collected in the course of its investigation. It reports that:
While the insurance industry has told Congress and the public that it spends 87 cents out of every premium dollar on health care, the actual medical loss ratio in the health insurance industry is significantly lower.
The insurance industry spends a lower percentage of premium dollars on patient care in the individual and small group market segments than in the large group market (businesses with more than 50 employees).
The largest for-profit insurance companies appear to be squeezing more profits for Wall Street investors by spending a lower percentage of premium dollars on patient care than other insurers.
***Please see the letter and files related to the investigation below***