When COVID-19 smacked the United States in March and April, health plans feared medical costs could skyrocket, jacking up premiums drastically in 2021, when millions of the newly unemployed might still be out of work.
But something else happened: Non-COVID care collapsed as hospitals emptied beds and shut down operating rooms to prepare for an expected onslaught of patients sickened by the coronavirus, while fear of contracting it kept people away from ERs, doctors鈥� offices and outpatient clinics. In many regions of the country, the onslaught did not come, and the billions of dollars lost by hospitals and physicians constituted huge savings for health plans, fattening their bottom lines.
But that doesn鈥檛 mean consumers will see lower premiums next year.
Numerous insurers across the country have announced plans to hike rates next year, though some have proposed cuts.
Peter Lee, executive director of Covered California, appeared skeptical about premium reductions in the state鈥檚 Affordable Care Act exchange, which is likely to announce 2021 health plan rates next week.
鈥淲ould we like zero increases? Absolutely. Would we like them negative? Yeah 鈥� but not if that means you鈥檙e going to increase premiums in a year by 20%,鈥� Lee said in an interview with this week. 鈥淲e鈥檝e been leaning on them to do what we always lean on them to do, and this is to have the lowest possible rates where you won鈥檛 be on a rate roller coaster. We want health plans to price right 鈥� not to price artificially low or artificially high.鈥�
Covered California provides coverage for about 1.5 million residents who buy their own insurance.
If the insurance exchanges in other states offer any guidance for Covered California, it is in the direction of moderate premium increases for 2021, though there is wide variation.
A KFF last week of proposed 2021 rates in the exchanges of 10 states and the District of Columbia showed a median increase of 2.4%, with changes ranging from a hike of 31.8% by a health plan in New Mexico to a cut of 12% in Maryland. (Kaiser Health News, which produces California Healthline, is an editorially independent program of KFF.)
Among the roughly one-third of filings that stated how much COVID-19 added to premiums, the median was 2%, with estimates ranging from minus 1.2% at a plan in Maine to 8.6% at one in Michigan.
The proposed premiums for ACA marketplace plans do not affect job-based coverage, but they may indicate how the pandemic is affecting premiums generally.
The consensus among industry experts is that COVID-19 has generated little pressure for rate rises, and health plans should err on the side of moderation. But some fear that many insurers will hold onto the reserves they鈥檝e built up, citing the possibility of widespread vaccinations and concerns that the care forgone in 2020 could rebound with a vengeance next year.
鈥淭he tendency of health plans, when they are faced with any degree of uncertainty, is to be very conservative and price for the worst-case scenario,鈥� said Michael Johnson, an industry observer and critic who worked as an executive at Blue Shield of California from 2003 to 2015. 鈥淎ctuaries are less likely to get fired if the plan prices too high than if the plan prices too low. But I think regulators really need to push back hard on that.鈥�
Lee said all 11 insurers participating in the exchange this year will remain in 2021, and no new ones will be added to the mix, though some of the current carriers will extend their coverage geographically. Ninety percent of consumers who buy their own health insurance get subsidies from the federal government or the state to help pay their premiums.
In January, California became the first state to offer who make too much money to qualify for federal subsidies. The lion鈥檚 share of the state subsidies is earmarked for those who earn between 400% and 600% of the federal poverty level, or $51,040 to $76,560 a year for an individual and $104,800 to $157,200 for a family of four.
The rate proposals expected to be unveiled next week will be subject to scrutiny by state regulators before they are finalized. Sign-ups for the plans start Nov. 1 and run through Jan. 31. This year, Covered California rate increase statewide was 0.8%, the lowest since the exchange started providing coverage in 2014.
The benefits reaped by health plans so far in the pandemic can be seen in strong second-quarter earnings and reduced spending on care. UnitedHealth Group, the nation鈥檚 largest health insurer, announced earlier this month that its in the April-June quarter nearly doubled from the same period a year earlier. Its medical spending plummeted from 83.1% of premium revenue to 70.2% over that period.
Anthem, the parent company of Blue Cross of California, Wednesday that its net profit in the second quarter doubled from the same period in 2019, also on the back of plunging medical expenses.
Anthem said it offered one-month premium credits ranging from 10% to 50% to enrollees in individual, employer and group dental policies 鈥� including its Blue Cross plans in California.
UnitedHealth said it has provided $1.5 billion worth of financial support to consumers so far, including premium credits and cost-sharing waivers, and expects to pay out $1 billion in rebates.
But UnitedHealth, which does not participate in Covered California, is seeking a rate increase of 13.8% in the New York exchange. Anthem, which covers about 80,000 people in Covered California, is planning rate hikes of 16.6% in Kentucky and 9.9% in Connecticut.
On the other hand, Kaiser Permanente, which covers more than one-third of Covered California enrollees, plans rate cuts in other states, ranging from 1% in Hawaii to 11% in Maryland. (Kaiser Health News, which produces California Healthline, is not affiliated with Kaiser Permanente.)
Lee downplayed the notion of a financial boon for California health plans, saying that, partly because of the use of telehealth, primary care has rebounded and the plans are paying for it. 鈥淪o we don鈥檛 see this as being at this point a bonanza year for health plans,鈥� he said. 鈥淩ather, it鈥檚 a year in which there are lessons learned for how we can deliver care in a pandemic.鈥�
Still, the health plans are in a far stronger position than they had feared earlier this year.
In March, Covered California released a showing that COVID-19鈥檚 impact on 2021 premiums for individuals and employers could range from an increase of 4% to more than 40%. But less than three months later, commissioned by the industry鈥檚 national advocacy group, America鈥檚 Health Insurance Plans, showed that even in the worst-case scenario of a 60% COVID infection rate 鈥� far above where it stands now 鈥� the pandemic would increase medical costs in 2020 and 2021 by 6% at most, and could even decrease them.
That moderate effect is largely attributable to what Katherine Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation, called 鈥渁 kind of yin and yang: If you have a lot of COVID, you don鈥檛 have a lot of other health care spending.鈥�
Independent of the course the pandemic takes, emergency room and outpatient visits still lag behind pre-COVID levels and will probably continue to do so next year, to the continued benefit of insurers, predicted Glenn Melnick, a professor of health care finance at the University of Southern California鈥檚 Sol Price School of Public Policy. That could be good news for consumers, he said, potentially leading to lower premium increases or even reductions next year.
On the other hand, hospitals and doctors have lost money, and the ones whose contracts with health plans are up for renewal will be looking to make up those losses, Melnick said.
鈥淧roviders could be asking for 20-25% increases next year,鈥� he said, 鈥渁nd if they鈥檝e got market power, they can make it stick.鈥�
This story was produced by聽, which publishes聽, an editorially independent service of the聽.