Not necessarily. COVID-19 could cost the U.S. between $34 billion and $251 billion for testing, treatment and care. Some analysts have predicted that premiums will rise between 4% and 40% next year because of the pandemic.
Because consumers, taxpayers and workers ultimately pay the bills, from our taxes, our lost wages, our premiums, and directly from our pockets, those costs will fall on all of us. As premiums rise, fewer people can afford coverage, and the uninsured rate goes up. This is both healthcare and insurance, so of course it’s complicated.
In good news, health insurance premiums for 2020 are set for the rest of the year. And insurance companies are required to keep capital reserve funds for disasters like this. The point of insurance is to cover unanticipated costs. Unlike other industries, insurers can’t build this year’s losses into next year’s rates. Under law premiums for 2021 should only reflect expected health costs for 2021. Gov. Ned Lamont’s recent executive order gives people who’ve lost their job or significant revenue an extra 60 days to pay premiums through June 1st, but it’s only an extension of time.
Overall, the insurers that insure Connecticut’s 320,000 individuals and small business members are in good financial health. Three of the five insurers, Anthem, Aetna, and United, together cover over 60% of that market. Each of those three earned A grades for financial strength from AM Best, meaning they have “an excellent ability” to meet financial commitments. Unfortunately, ConnectiCare, covering about 110,000 individuals and small business members in our state, got only a C+. In AM Best’s opinion, the company has only “a marginal ability to meet their ongoing insurance obligations.” Harvard Pilgrim was not rated.
ConnectiCare representatives report that the company is financially strong and are confident that they have sufficient reserves to cover members’ claims.
So here’s the complicated part. While scientists predict that the pandemic will peak soon and dissipate by summer, it could rebound in the fall and winter.
If COVID-19 costs run into 2021, or if insurers convince regulators that they might, premiums will be higher. Since elective surgeries and other treatments have been delayed, it is possible that when the pandemic is over the backlog of care will run into 2021, also raising premiums. There is also the risk that delayed preventive care and disease management for chronic conditions could increase other health problems and costs. But those delays also reduce insurers’ costs this year.
If spending is high this year and insurers have to dig deep into their reserve funds to stay solvent then they can recoup those losses by raising premiums next year. The vaccine expected to come out next year will also increase costs. Those are two factors insurers are likely considering as they contemplate setting their rates for 2021.
Many are urging that patent and other intellectual property advantages be waived for COVID-19 treatments and vaccines to expand access and guard against drug company price opportunism pushing health spending even higher. In promising news, Congress is considering some relief for insurers, as they have given to other industries hit by the pandemic, to mitigate the impact on 2021 premiums.
The number of Connecticut residents without health coverage was likely to grow even without premium increases. Hundreds of thousands of Connecticut residents have lost their jobs in the recession the pandemic has triggered.
Since most of us get our coverage through employment, that will increase the uninsured rolls. Hopefully most businesses will re-open and re-hire employees, but some may not. Higher premiums would make it more difficult for re-opening businesses to afford health coverage for their workers. Furloughed workers are now dipping into savings to pay their bills, making it harder for some to afford coverage, even if they are re-hired.
Premiums next year will almost certainly rise. If they rise too much, it will cause more uninsured, more financial hardships for struggling residents, and delay recovery from the recession. These are uncertain times. But regulators can sort through the uncertainty using reasonable predictions, consider insurers’ ample reserves, and remain fair to all, to keep coverage as affordable as possible. Connecticut’s health and economy depend on it.
Ellen Andrews, PhD, is the executive director of the CT Health Policy Project. Follow her on Twitter @CTHealthNotes.
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