One of the biggest fears I had with the health care reform bill was insurers coming up with creative accounting methods to circumvent the requirements that they spend 85% of premiums on health care related costs. Now that fear is becoming a reality:

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.

And this is how bad it is:

For example, WellPoint Inc “has already ‘reclassified’ more than half a billion dollars of administrative expenses as medical expenses,” it said.

There could be a hopeful silver lining to all this. If the Democrats remain in control of Congress and insurers cook the books to the point that health care costs are rising as much as they have over the past decade, well we will have another health care reform fight. This time it will have to be to put in real competition to the private sector and that can only come in the form of a public option. Actually this would be a perfect argument to get the public option in and might be what some Democratic leaders were thinking all along.