What is the Impact of COVID-19 on Medical Insurance Rates?

Changes in insurance premium rates due to COVID-19 have proven difficult to estimate due to the uncertainty surrounding the pandemic. While overall no significant changes are expected for 2021, some companies have increased their rates by up to 8.4%, while others have decreased them. The mean result is an increase of 1.1%. When COVID-19 is considered, factors driving an increase in rates include costs of treatment and testing as well as delayed treatment. Meanwhile, a factor that could decrease premium rates would be federal funding.

Also, check out the impact of COVID-19 on life insurance.

No Changes for 2021

  • According to a report from the Kaiser Family Foundation (KFF) in which filings from insurance companies offering coverage on the Affordable Care Act (ACA) were studied, overall rate changes would be minimal.
  • Furthermore, a panel in which KFF, EPIC, and IQVIA participated on October 19, 2020, reported that the overall increase in premium rates in the individual marketplace plan was 1.1%.
  • In addition, as some insurers incorporated COVID-19 into their calculations while others did not, these canceled each other, leading to a 0.0% median rate change associated with COVID-19.
  • The KFF report establishes that 43% of filings cite COVID-19 as one of the factors influencing any rate considerations. Among these insurers, decreases of up to 3.4% and increases as high as 8.4% in rates were seen.
  • These companies have stated that COVID-19 testing, delayed medical services rebound, the possible expanded vaccination, and increased morbidity due to delayed medical attention would be factors that lead to an increase in premium rates.
  • Meanwhile, the main factor driving a decrease in premium prices would be a lower use of health care services due to people wanting to avoid exposure.
  • That said, according to the PwC’s Health Research Institute, the uncertainty surrounding COVID-19 would not allow for accurate estimates on how the pandemic will affect insurance rates.

Delayed Medical Services

  • Cited as a factor that would drive an increase in rates, PwC reports that 71% of people with employer-based insurance had stated they had delayed their medical care because of COVID-19.
  • According to the report, this was even more frequent among individuals with chronic health conditions, who could present complications due to lack of care. This could require more expensive treatment, driving up premium prices.
  • In addition, the American Benefits Council conducted a survey across 109 Fortune 500 companies. Among other things, the effect these companies expected COVID-19 to have on self-insured plans was questioned.
  • Reportedly, 4% of companies expected costs for the plans they offered to decrease in future years, while 35% expected no change and 54% anticipated a moderate increase.
  • Of those predicting increased costs, 80% stated it would be due to delayed treatments. Another factor was the cost of treatment for COVID-19.
  • Conversely, other reports establish that, at least for 2020, the delayed treatment trend helped to offset the impact of COVID-19 treatment costs.

COVID-19 Treatment and Testing

  • Expanding on the information provided by the KFF report, the American Academy of Actuaries (AAA) released a brief in which COVID-19 treatment and testing play an essential role in premium rates increase.
  • Although the overall impact of COVID-19 treatment on insurance rates is not well understood, it has been established that approximately 15% of infected patients require hospitalization.
  • Expenses for this can reach high numbers as pneumonia treatment is often needed as well as the use of ventilators in the most serious cases.
  • While treatment costs continue to be uncertain, an increase in testing spending is expected. This is mainly driven by the fact that, as companies return to work, wider and more frequent testing will be a requirement.
  • There is also uncertainty regarding the period during which testing will be needed, as there are no reliable estimates on when a vaccine will be available.
  • However, it is unknown if employee testing would be covered by employers, health plans, or government funding, adding to the uncertainty surrounding this topic.

Federal Funding

  • While federal funding has been issued for different industries, insurance companies have not received direct funding from the government to offset pandemic-related expenses.
  • Although some insurers benefited from the CARES act, the industry has requested government support to offset any possible premium increases.
  • Interestingly, the payment of the risk corridor provision established under ACA has been cited as a factor influencing future rates. These payments started to take place in September 2020.
  • In regard to testing, coverage by the federal government could also be a factor that would help in decreasing premium rates in future years.
  • Lastly, state by state considerations also play a role in premium rates increase, as each state needs to approve changes proposed by industry players.
Glenn is the Lead Operations Research Analyst at The Digital Momentum with experience in research, statistical data analysis and interview techniques. A holder of degree in Economics. A true specialist in quantitative and qualitative research.

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