Answering Your Questions
- Why are premiums going up?
- Where Does The Money Go?
- Who makes sure insurers follow the rules?
- Can my state legislator change what my insurance pays for?
- How do we know our premiums pay for care?
- How much goes to salaries and administration?
- I pay taxes on health insurance?
- How does insurance work?
- How much of my premium goes to profit?
- Why are some our health premiums set aside in medical reserve?
It’s the state’s job to ensure all rules are followed for most kinds of insurance. It regulates everything from how Minnesotans get insurance to how their medical bills are paid. For other kinds of insurance, the federal government is involved. Locally, the departments of commerce, health and human services all oversee health insurers. In addition, there are all kinds of audits and reviews.
Most health insurance Minnesotans get through work is what’s called self-funded, and state laws don’t apply. Provided mostly by large corporations, self-funded means the employer uses its funds, not an insurance company’s, to pay medical expenses. Federal, not state, laws govern this insurance.
Federal laws also govern how insurers help pay for care for people with Medicare. About 17 percent of Minnesotans have this type of national insurance.
About 25 percent of Minnesotans have private insurance that both state and federal laws govern. Minnesota’s lawmakers have direct influence on the way health insurance works for those who buy it on our own or get what’s called “fully insured” policies through work.
And, both the state and federal government set the rules Medicaid, a type of insurance for about 17 of Minnesotans who are elderly, poor or live with disabilities.
By law, insurance companies file year-end reports on March 1 and April 1. Like financial reports prepared by governments and businesses, health insurers’ statements are audited, regulated by law and are completed using standard accounting practices. The standards, rules and definitions come from the Financial Accounting Standards Board, National Association of Insurance Commissioners and the State of Minnesota. All the oversight and rules are to make sure the information is consistent over time and across organizations.
There is a huge penalty for any false information in filings. A company’s chief financial officer and chief executive officer must attest that the numbers are right. If false numbers are published, the company’s lead finance person could be put in jail. Literally put in jail.
We sometimes hear from people who doubt that all the money is shown in these reports. As a result, there are several additional audits to look over the shoulder of the insurer’s own accountants and outside auditors. There are different kinds of reviews used for different purposes. Other organizations—both public and private—analyze the data, too.
In the end, money paid to insurers pays medical bills. There are a lot of ways to compare how insurers pay for care, who gets paid and how much they get. The bottom line is still the same: our premiums are expensive because care is expensive.
That’s good news, because paying for care is exactly what premiums should do. There are state and federal laws in place to make sure premiums go to pay for medical care. The Minnesota Council of Health Plans and the Minnesota Department of Commerce and the Minnesota Department of Health and the Minnesota Department of Human Services all collect information about how our insurance companies spend the resources we have entrusted to them.
Here is a closer look at the areas of administrative expenses and how the the Health Department tracks them. Many of the expenses inside an insurance company help make sure you get the best care possible. Employees inside these companies make sure people who give care are properly licensed and trained, evaluate the care we get, help policyholders get care, pay medical bills and more.
Here is how the Minnesota Department of Health tracks administrative spending. This is 2017:
Here’s what profit (called operating gain) margins looked like the last few years for all the Council members combined.
Being financially responsible means saving for a rainy day. All kinds of organizations—counties and hospitals, factories and school districts, corner businesses and multinational corporations—set aside a portion of their income to make sure they can keep paying for care when facing unpredictable expenses and hard times. The same is true for Minnesota’s health insurance companies. The Department of Commerce monitors finances.
As more people have health insurance and care keeps getting more expensive, medical reserves must grow too. In all, the health insurers that work with the Council could pay for about three months of care with what is in medical reserves.