By Tom Curry National affairs writer
msnbc.com
updated 1/7/2010 11:57:15 AM ET 2010-01-07T16:57:15

Claim: Health reform will allow the federal government to control insurance firms' profits and expenses.

Although state insurance commissioners do regulate insurance companies to some degree, the industry's critics argue that insurers still reap unwarranted profits and skimp on paying for medical claims by people who they insure. Some members of Congress want to control how much insurance companies spend on marketing and other expenses versus how much they spend on paying for medical costs of the insured. To take one insurer as an example, in 2008, WellPoint collected $61 billion in revenue, much of which came from customers' premiums. According to its annual filing with the Securities and Exchange Commission, Wellpoint used 83.6 percent of its revenue to pay benefits to those insured. The other 16.4 percent was used for marketing, administrative expenses, tax payments, and profit. It had $2 billion in net income, making its profit margin 4 percent.

Fact or fiction?
Fact. At the urging of Sen. Jay Rockefeller, D- W.V., the Senate bill requires insurers to spend at least 85 percent of their revenue on claims, if they cover employees of large firms, or 80 percent of the revenue on claims if they cover employees of small businesses. Calling health insurers "predacious," Rockefeller said, "It is only fair to ask them, at a time when we're going to be insuring a lot of new people and a lot of new revenue is going to be coming in for them, that they actually spend the money on health insurance, or at least a large portion of it." The bill comes close to a line set by the Congressional Budget Office which said that requiring that 90 percent of premium payments be for claims would make the health insurance industry "an essentially governmental program."

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