The projected costs for 170 million Americans in the commercial health insurance market – which includes the individual, small-group and large-group markets – for testing, treatment and care specifically related to the COVID-19 coronavirus will range from a low of $34 billion to $251 billion or more in the first year of the pandemic.
That's according to Covered California, which on Monday released what it said was the first national projection of healthcare costs due to the coronavirus pandemic.
The numbers suggest a substantial impact. The $251 billion worst-case scenario could be realized if there's no federal action to slow the spread, and consumers will feel these increased costs through higher out-of-pocket expenses and premiums. There's also the potential of employers shifting more costs to employees, or dropping coverage altogether.
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Covered California's chief actuary, John Bertko, prepared the report after engaging with external actuaries with deep expertise in the commercial insurance markets, and after analyzing expert clinical reviews and interviews with health insurance plan leaders.
WHAT'S THE IMPACT?
The potential COVID-19 costs for 2020 could range from 2% of premium to more than 21% of premium, the analysis showed.
Premiums in the individual and employer markets for 2021 – which are in the process of being set right now – could rise 40% or more solely because of these unexpected COVID-19 costs, in the absence of federal action, since insurers would seek to recoup unplanned for losses from 2020 and budget for pandemic-related costs in 2021.
Insurers will submit their 2021 rates in May and finalize them around July 1. That means congressional action would be needed soon to have an impact on 2021 premiums.
The increased costs could have one chilling side effect: During a global health crisis, many of the 170 million Americans in the commercial market could lose their coverage. Costs would also have a detrimental effect on small businesses and large businesses that are struggling.
Covered California has sent the policy/actuarial brief to members of Congress to help inform ongoing discussions at the federal level about how to handle the COVID-19 response. The group suggested several actions that Congress could take to mitigate the potential impact of these cost increases on consumers.
It recommended enhancing the federal financial assistance provided in the individual market to increase the level of tax credits for those earning under 400% of the federal poverty level, and expanding subsidies to those earning more than 400% FPL, as California implemented on a three-year basis in 2020.
It also suggested establishing a temporary program to limit the costs of COVID-19 for health insurers, self-insured employers and those they cover, which would directly benefit individuals and small employers for 2020 and allow for more certainty in their pricing for 2021. Congress could also establish a national special-enrollment period for the individual market, such as has already been adopted by 12 marketplaces, representing 30% of Americans, Covered California said.
Covered California's analysis comes just days after it announced a special-enrollment period for uninsured individuals who need healthcare coverage amid the COVID-19 pandemic. From now until June 30, anyone who meets Covered California's eligibility requirements can enroll in healthcare coverage, in a manner similar to the rules in place during the annual open-enrollment period.
While Covered California's analysis deals with the commercial market, other populations – including those in Medicare, Medicaid, and other public programs, and the uninsured – will also need a comprehensive review and solutions to address the unplanned-for costs, authors said.
THE LARGER TREND
Consumers aren't the only ones who could feel the pinch. Because of the outbreak, the financial outlook for the nonprofit public-healthcare sector in the U.S. has changed from stable to negative, Moody's Investors Service found. That prediction will likely result in decreased revenues and increased expenses, with higher staffing costs and a greater need for supplies, such as personal protective equipment.
Lingering ripple effects of this challenging economic situation will also drive lower cash flow, even after the outbreak is contained. These effects include a reduction in the value of hospitals' investment portfolios and potential rising unemployment or widespread layoffs that would result in the loss of health benefits.