Use and Abuse of the Medical Loss Ratio to Measure Health Plan Performance

Health Affairs

Volumn 16, Issue 4, 1997, Pages 176-187

  Robinson, James C ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ACCOUNTING; ARTICLE; COST BENEFIT ANALYSIS; ECONOMICS; FORECASTING; HEALTH CARE QUALITY; HEALTH INSURANCE; HEALTH SERVICES RESEARCH; HUMAN; INCOME; MANAGEMENT; METHODOLOGY; STANDARD; STATISTICS; TREATMENT OUTCOME; UNITED STATES;

ACCOUNTING; COST-BENEFIT ANALYSIS; FINANCIAL AUDIT; FORECASTING; HEALTH SERVICES RESEARCH; HUMANS; INCOME; MANAGED CARE PROGRAMS; MANAGEMENT AUDIT; OUTCOME AND PROCESS ASSESSMENT (HEALTH CARE); QUALITY OF HEALTH CARE; UNITED STATES;

EID: 0345846799     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.16.4.176     Document Type: Article

References (19)

1. Weiss Ratings, Which Health Insurers Give You the Most for Your Money? Which Give You the Least? (Palm Beach Gardens, Fla.: Weiss Ratings, July 1996).
2. E. Sanders, "Bills Spark Medical Battle," Los Angeles Daily News, 18 March 1994, 1; and T.E. Poling, "HMOs Jockey for Success in Alamo City Market; Prudential Leads in Spending on Services," San Antonio Business Journal, 6 October 1995, 1.
3. E. Sanders, "Bills Spark Medical Battle," Los Angeles Daily News, 18 March 1994, 1; and T.E. Poling, "HMOs Jockey for Success in Alamo City Market; Prudential Leads in Spending on Services," San Antonio Business Journal, 6 October 1995, 1.
4. American Political Network Health Line, "HMOs: Are Medical Loss Ratios an Indicator of Quality?" Healthline Internet Service, 13 October 1995.
5. N.M. Kane, "Financial Performance of IPA/Network HMOs in Three States" (Final report to the Commonwealth Fund, New York, New York, June 1995).
6. In releasing data on medical loss ratios, the California Medical Association announced that the cost of medical care is not the source of increased health insurance premiums, but rather that administration and profits are to blame. A. Barnum, "HMO Industry under Fire," San Francisco Chronicle, 3 April 1994, D1.
7. T.C. Foley, "Health Insurance: The Trouble with Fixed Loss Ratios," Contingencies (November/ December 1995): 54-56.
8. Associated Press, "Oxford Report Earnings Up, but Stocks Fall," 7 May 1996.
9. Sherlock Company, Pulse: Market, Financial, and Operating Statistics for HMOs (Gwynedd, Pa.: Sherlock Company, June 1996).
10. T.E. Hodapp and M. Samols, HMOs 1995: The Right Place, the Right Time, the Right Idea (San Francisco: Robertson Stevens and Company, 1 September 1994).
11. Health plan medical loss ratios are also cited by investment analysts who follow the stock prices of physician practice management (PPM) firms, which contract with HMOs to provide physician services from the medical groups and independent practice associations owned and/or managed by the PPMs. These analysts interpret high HMO medical loss ratios as a favorable indicator for PPM profitability, since HMOs under market pressure to lower medical loss ratios are increasingly contracting with PPMs. For example, see UBS Securities LLC, "FPA Medical Management Inc.: Buy," UBS Securities Equity Research (New York: UBS Securities, LLC, 25 July 1996).
12. J. Wennberg and M. Cooper, The Dartmouth Atlas of Health Care in the United States (Chicago: American Hospital Publishing, 1996).
13. This is the combined figure for the northern and southern California Kaiser regions.
14. For a recent example, see P. Sinton, "How Much HMOs Spent on Patients," San Francisco Chronicle, 11 February 1997, D1.
15. The following year the value of the assets owned by the nonprofit organization was transferred to two charitable foundations. Blue Cross of California then converted into a for-profit company. It is now the California subsidiary of WellPoint Health Networks. In summary, Blue Cross of California was the nonprofit parent of the for-profit WellPoint Health Networks, which controlled CaliforniaCare Health Plans, which marketed the Prudent Buyer PPO and CaliforniaCare HMO; now WellPoint is the forprofit parent of Blue Cross of California, a forprofit subsidiary, which markets a range of HMOs and PPOs in California using such names as Blue Cross of California, Prudent Buyer, and CaliforniaCare, with non-California plans formed under the for-profit subsidiary UniCare, which formerly was the nonprofit workers' compensation subsidiary in California. Any questions?
16. Richard A. Caldwell, director, Medical Informatics, FHP Health Care, personal communication, December 1996.
17. For the relationship between art and medicine at FHP, see R. Gumbiner, FHP: The Evolution of a Managed Care Health Maintenance Organization, 1955-1992 (Berkeley, Calif.: University of California Press, 1995).
18. Patricia E. Powers, executive director, Pacific Business Group on Health, personal communication, December 1996.
19. Pamela Krol, health plan manager, Human Resources, Southern California Edison, and chair, HEDIS Users Group Finance Panel, National Committee for Quality Assurance, personal communication, December 1996.