Introduction

Internal Eliminations are what your insurance company uses to defraud the insured Americans by circumventing the Affordable Care Act’s (ACA) Medical Loss Ratio mandate. Medical Loss Ratio (MLR) is the proportion of benefits returned to the consumer as a proportion of his or her premiums collectively. The ACA mandates that for its policies, the insurance company must return 80-85% of the premiums as benefits. For example: if United Healthcare charges you $100 per month they must return on average $85 for your medical care. Internal Eliminations is the accounting trick of moving profit from one wholly owned subsidiary to another to avoid running afoul of this mandate. Using real numbers, if United Healthcare charges you $100 per month as a premium, and returns $46.14 as benefits, they can internally eliminate $38.86 of profit by transferring it to its wholly owned subsidiary, Optum, only show $15 profit on their books and still be in compliance with the ACA's MLR law, while actually making $53.86 profit from every $100 you send them. That is a lot more than 15%.

The Problem

UnitedHealth Group (UHG) is the conglomeration of United Healthcare, the insurance company, and Optum, the health services company. We obtained a copy of the “Data Elements 2025 Outlook” that shows their estimates for revenue and profits for 2025. We obtained these from our LinkedIn friends Chris Deacon and Joshua Brooker, who wrote on this subject. We are including screenshots of it here:

Items to note: United Healthcare (UHC) is estimating $337 billion to $340 billion in revenue. The next line down, labelled “Eliminations” is this transfer we talked about previously, for $164 billion to $165 billion. Finally, operating earnings are stated as $17.5 billion to $18 billion. For simplicity, let’s take the worst case scenario, the one that makes UHC look the best. We can calculate total profit from their estimates they provided like this:

$164,000,000,000.00

$17,500,000,000.00

$181,500,000,000.00

This number represents the total earning or profit estimated for 2025. Profit margin is defined as profit divided by revenue and therefore would be

$181,500,000,000.00 ÷ $337,000,000,000.00 = 0.538576

This means that the effective profit margin is 53.86% or that they keep $53.86 of every $100.00 you give them.

We all know, or just learned, that a company the size of UHC is bound by law to return 85% of the premiums paid as benefits. We have just proven, with their own documentation, that they are keeping 53.86% of every dollar that is entrusted to them or a whopping 38.86% extra, that they legally are not entitled to.

These murdering bizdiots must be stopped.

The Solution

The solution, of course, is to put health insurance companies, with their criminal, murderous profit margins, out of business, and we are going to show you how, right here and right now. First, you don't want greedy, profit-above-everything, business people in charge of your healthcare. The Commonwealth Fund identified several problems in their paper “U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes” That basically boiled down to two problems:

Health insurance is too expensive
Patient education is largely ignored

When we address these two problems, we fix the US healthcare system.

The Concept

Health insurance companies have two inputs: a patient and a procedure, and one output: a check to the practice for the procedure performed. That is it. If we automate the process between the input and the output, then we have eliminated everything the insurance company does. The only other thing we will address is the way to educate and incentivize the patient on how to live a healthy lifestyle. That would result in fewer claims, causing reduced rates for everyone.

The Execution

We at Sentia have designed and developed a solution that completely automates health insurance. We provide the Electronic Medical Records (EMR) system to the practice, and when they document a patient encounter, we pull out the procedures performed and pay for them in real time. There are no networks, no adjudication, no denials, no medical coding, no big buildings, no people, no float and most importantly, little to no cost once the system is built. For this service we charge $10 per month plus the actual cost of the risk. Remember that we proved with their own documentation that your health insurance company only returns 46% at most, if all their systems are automated, of your premiums as benefits. We can return the 54% they waste to the patient, in lieu of the previously stated $10 per month, plus the actual cost of the risk. There are other efficiencies we will explain, and a way to manage chronic, behavior-based disease.

Patient Education

Also remember that treatment for chronic, behavior based disease consumes 84%, or $3.7 trillion of the $4.4 trillion spent on healthcare each year in the US. The average of avoidable deaths per 100,000 in OECD countries is 225. In the US it is 335, or about 1/3 higher. If we could bring the US average down to the OECD average, we would save about $1.2 trillion. That is a further reduction in costs of about a quarter.

How do we do this? We offer financial incentives for people who live a healthier lifestyle as measured by our built-in health and wellness system. This system takes into account measurements taken at the primary care physician’s practice, like height, weight and blood pressure, plus things screened for in blood work. Additionally, there is a mental health screening right in the wellness package. This system looks at all these factors and then prescribes patient education based on the results. At Sentia, this is part of the system. We can tell when the patient opened the patient education and how long they spent reading it, and offer a small discount for simply doing so. A larger discount is offered for reading and following the education, as evidenced by better results in the patient’s health assessment.

The Finances

Let’s look at big round numbers. Let’s say we can save the patient about 50% on their health insurance up front. Let’s say that we save the people of the US another 25% by being educated about healthy living and getting to the average OECD deaths per 100,000. We know that eliminating medical coding, providing a free EMR to the practice and putting compliance and efficacy reporting into that system will save each and every practitioner an additional $77,000 or about 2% of the total. If we total all that up, we see more than 75% savings. That means that we would have not only the best healthcare on the planet but also the cheapest.

Conclusion

We have shown a way to save more than 75% from the cost of health insurance and have addressed both of The Commonwealth Fund’s two conclusions about health insurance in the US: cost and education. We have all of this written and deployed in a prototype application. The only thing we really need to get this all started is to clean up that application and turn it into an enterprise system with logging, administration and redundancies in hardware. We will need funding, probably about $10 million over the first year. For comparison, United Healthcare had revenue of $371.6 billion and net earnings of $22.3 billion in 2024. With about 50% upfront savings we should service and retain 90% or more of the 330 million insured people in the US. That gives us a revenue of $36 billion.

This figure shows that this is a viable business proposition.

We have shown a way to make patients healthier by educating them on the consequences of their behavior, and a way to capitalize on that to the sum of $1.2 trillion or about 25%. If we add that to the process automation savings of our solution, we are in the ballpark of more than 75% savings in total. We already have the best doctors and the best equipment; we just need to implement the above detailed framework to give them all the tools necessary for success.

We have this system in prototype now, fully functioning.

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We have built a comprehensive health information system to keep the patient healthy and on the right track with the ability to incentivize healthy living. Implementing this system should be fairly simple and will completely revolutionize the way healthcare is paid for, saving countless lives. We have shown a way to use this system to make the best healthcare system in the world also the most efficacious and the most affordable.

Accounting Tricks to Circumvent Medical Loss Ratio Laws: Internal Eliminations

2/19/2025 12:00 AM