THURS

Posted by scotts on 04/15/2010

WASHINGTON (Reuters) – Some of the largest U.S. health insurers are changing their accounting practices to book administration costs as medical costs in an attempt to circumvent new industry reforms, according to a U.S. Senate panel's report released on Thursday.

Under the healthcare law passed in March, insurers must adjust their spending habits to meet new requirements. For example, large group plans must spend at least 85 cents of every premium dollar paid to them on actual medical care as opposed to administrative costs, while individual and small group plans must spend 80 cents.

Wall Street closely watches such spending levels, known as medical-loss ratios, or MLRs, as a sign of potential profits. Major health insurance stock indexes fell after the report.

"The insurance industry is beginning to consider the financial impact of the new federally required (medical) loss ratio requirements, including questionable changes in their accounting practices," the Democratic-led Senate Committee on Commerce, Science and Transportation said in a statement