Impact of COVID-19 on the Health Insurance Industry
By Christopher Jackson, Partner, Assurance Services
The novel strain of coronavirus called COVID-19 is having a profound impact on many facets of the health insurance industry.
Increased Coverage for COVID-19
Health insurance companies across the U.S. are expanding coverage and providing greater access to healthcare services for their policyholders.
As part of the Families First Coronavirus Response Act, Congress eliminated patient cost-sharing for COVID-19 diagnostic testing services provided under employer-sponsored group health plans. In addition, many health insurers have waived the customer cost-sharing and co-payments for hospitalization and other costs to treat the virus.
In order to determine the specific coverage provided by health insurers, the following website from America’s Health Insurance Plan provides the specific COVID-19 coverage information for most health insurance companies in the U.S.:
In addition to helping policyholders, these reductions in patient out-of-pocket costs should also benefit healthcare providers, as they will reduce the burden of billing and collection from patients who may not have the resources to pay for such services and could ultimately become bad debts.
Expansion of Telehealth Services
Telehealth increases provider capacity and, more importantly, increases the safety of both patients and healthcare providers by eliminating in-person appointments. Many routine healthcare services are currently only available through telehealth as a result of COVID-19.
Many insurers are waiving all co-payments and deductibles for telehealth services for non-COVID-19 health issues.
Telehealth has been viewed as a cost-saving measure by insurance companies as it has become more widely available, but mandatory telehealth for routine office visits as a result of COVID-19 will increase patients’ familiarity with this care delivery method, which may broaden its acceptance by patients once the coronavirus health crisis has receded. Insurance companies are hoping that the expansion of telehealth will help reduce the cost of claims.
Delays in Payment of Insurance Premiums & Policy Cancellations
Certain states have issued legislation allowing individuals and businesses to defer the payment of insurance premiums for a period time. For example, the State of Connecticut enacted Executive Order 75, which allows for a 60-day deferral of insurance premiums for individuals and businesses impacted by COVID-19 (subject to certain terms and conditions).
While this is beneficial to policyholders, it could negatively impact insurance companies by reducing cash inflows during a period when the insurance companies are attempting to accelerate claim payments to healthcare providers in order to help fund the battle against COVID-19.
While Coronavirus Aid, Relief and Economic Security Act funding is expected to help businesses retain employees, insurance companies are still expecting increased policy cancellations as a result of increased unemployment and the overall economic downturn. Health insurance policy cancellations will also place an additional burden on the healthcare system when the patients become uninsured.
Overall Financial Impact on the Insurance Industry
The cost of providing increased COVID-19 coverage to policyholders, coupled with the overall higher frequency and severity of claims to treat the virus and exacerbated by policy cancellations, is expected to have a profound impact on the profitability of the insurance industry.
When the 2020 health insurance policies currently in place were priced, there were no premium increases in anticipation of COVID-19. It is uncertain whether delays in elective surgeries and other non-emergent treatments in addition to the savings resulting from telehealth will have a meaningful impact to offset the increased costs of COVID-19. There is still a great deal of uncertainty regarding the timeline to contain COVID-19 and the ultimate costs for the insurance industry to pay for such claims. It is also uncertain whether the government will provide relief to the insurance industry. COVID-19 has the potential of increasing future health insurance premiums significantly, but the ultimate impact will be determined by the outcome of the aforementioned variables.
Marcum provides services to clients in both the insurance and healthcare industries and is experienced in developing business strategies to help navigate through the many financial perils and uncertainties of COVID-19. Consult with your Marcum healthcare advisor for further details.
Coronavirus Resource Center
Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.