WASHINGTON — The idea was simple enough: make sure that health insurers spend the vast majority of their revenue on patient care, instead of using it for things such as advertising, profits and executive pay.
To that end, the new health care law says an insurer must give money back to consumers if it devotes less than 80 percent of premiums to paying medical claims and improving care. For insurers serving large groups, the target is 85 percent.
But even before the health care overhaul was signed into law last month, one of the nation's largest insurance companies reclassified certain expenses in a way that increased its so-called medical-loss ratio. In January, WellPoint began including under medical benefits such costs as nurse hotlines, "medical management," and "clinical health policy," a WellPoint executive said in a March briefing for investors.
WellPoint spokesman Jon Mills said in an e-mail that it is appropriate for his company to reclassify expenses related to the management of members' health.
In effect, WellPoint turned more than $500 million of administrative items into medical expenses, the Senate Commerce Committee's Democratic staff said in a report Thursday.
Weeks after the law was enacted, health insurers face tactical and strategic choices that could alter their short-term fortunes. Should they boost premiums before rates become subject to greater oversight? Should they step up efforts to avoid people with pre-existing conditions before they are required to accept even the sickest applicants?
Some analysts say the new law gives insurers powerful motivation to try to increase profits and reserves while they still can.
"They will absolutely try to cherry-pick as much as they can get away with between now and when the legislation is fully implemented," said Wendell Potter, former spokesman for Cigna.
Insurers may decide to "get our prices up while we can because after the revolution we're not going to be able to," said Mark Pauly, a health care economist at the Wharton School of the University of Pennsylvania.
But there are also counter-incentives. From an economic standpoint, raising rates could cause insurers to lose business.
From a regulatory standpoint, charging excessive premiums during the next few years could give authorities grounds to bar insurers from new marketplaces known as exchanges when they open for business in 2014.
From a political standpoint, pushing limits while officials are still writing the rules could boomerang for insurers. WellPoint's plan to raise rates in California by 39 percent fueled arguments for reform earlier this year and helped drive the legislation to final passage.
After a warning from Health and Human Services Secretary Kathleen Sebelius, the insurance industry's main lobby has already signaled that its members won't try to exploit a potential loophole in the requirement that, starting this year, insurers cover children irrespective of their pre-existing conditions.
Some of the openings for insurers are plain to see. For example, although the law bans annual and lifetime limits on the dollar value of benefits, it does not ban limits measured in other terms. That leaves the door open to limits on, say, the number of courses of treatment for an expensive problem such as infertility.
The expansion of Medicaid could trigger a rush by private insurers seeking to manage care for beneficiaries. In a report Thursday, UnitedHealth Group said Medicaid programs could save billions of dollars by moving recipients into managed care.
Private insurers made that argument about Medicare in years past, but the government concluded it was overpaying private health plans to care for Medicare beneficiaries. It cut such reimbursements in the recent legislation.