The coronavirus pandemic is upending the U.S. health coverage market in unexpected ways, forcing some insurers to issue refunds to customers this year and complicating the models they use to set the prices for next year's premiums and copays.
"It's a difficult process … and from a financial perspective what I've said to my board is we have to look at 2020 and 2021 as one fiscal year," said Michael Carson, president and CEO of Harvard Pilgrim Health Care, a New England-based not-for-profit health insurer.
While insurers have had to shell out more money to cover coronavirus treatments, more and more people are reducing spending by putting off all but the most vital medical care. The sharp drop in elective medical procedures — like routine cancer screenings and wellness checkups — has cut spending so much that it's skewing projections for next year's plans. Some insurers, including Anthem, UnitedHealth Group and Humana, have given members money back in some cases through premium rebates and waived copays on doctor visits.
Harvard Pilgrim is giving members with Medicare supplemental insurance or who have coverage through employers a 15% discount on premiums this fall, anticipating it will face substantial rebates for the first half of the year under the Affordable Care Act, which requires insurers to spend at least 85% of premiums on medical claims.
"We're giving it back to the consumer and the employer up front, rather than waiting," said Carson, adding that they are starting to see an increase in medical claims. which will determine whether there will be further rebates in coming months.
For 2021, Carson is looking to hold premium increases down, though he adds that he's still watching claims this month to try to get a better handle on next year's costs.
Rising Covid-19 outbreaks may be sending medical costs back up for some carriers to this spring's emergency levels in the South and West, where hospitals had resumed elective surgery procedures. Last month, Texas banned elective medical procedures in 100 counties that cover most of the state.
Analysts at PwC's Health Research Institute say there's so much uncertainty because of the Covid disruption that it's difficult to pinpoint whether medical-cost trends will be significantly lower or higher next year.
In the institute's Behind the Numbers outlook for 2021, researchers estimate that a disruptive second wave of coronavirus next winter could push out more elective care, resulting in only a 4% growth in medical- cost trends — one-third lower than the average growth over the last five years.
The researchers said if most of the care deferred this year gets pushed into 2021, medical costs could balloon by 10% above pre-coronavirus levels next year, which would make for the highest rate of medical-cost inflation since 2007.
Eight in 10 Fortune 500 company employers surveyed by the American Benefits Council are concerned about medical costs surging. Large self-insured employers worry that delayed treatment this year will result not only in a higher number of medical claims in 2021, but also higher overall costs for more acute care.
"They're worried that some of these elective procedures will simply be bunched up next year and some people will be sicker next year … because certain things weren't detected earlier," said James Klein, American Benefits Council president.
Even without a second wave of coronavirus infections next fall and winter, employers are also bracing for higher costs associated with Covid testing to contain the virus among their workforce.
"With required testing in order for people to return to the workplace, that will be a big expense," said Klein.
Pharmaceutical prices could be one of the biggest drivers of medical-cost trend for next year. More than 100 drugmakers are working on developing a Covid-19 vaccine and therapeutic treatments for the coronavirus that could become available as early as 2021. Gilead, the first to market with a new therapy, priced its coronavirus treatment Remdesivir at more than $3,000 for patients with private insurance.
Hospitals and physicians still struggling financially from the abrupt shut down of nonemergency care last spring are facing higher operating costs for protective equipment and safety precautions as they've resumed operations this spring.
Like many insurers, Harvard Pilgrim has provided health systems and clinicians in its networks with advanced payments and financial support during the crisis, but the carrier plans on holding the line when it comes to reimbursement increases for 2021.
"It comes up for discussion, but I wouldn't expect us to make up that lost ground," Carson said. "We cannot address one-time revenue challenges of the hospital system by making that up in rate increases for our customers."
Benefit managers surveyed by research firm Piper Sandler reported rate increase requests of 3% to 4.4% from the major insurers, but with mounting Covid-19 infections in many parts of the country creating about an economic recovery, analysts say employers may take a little longer this year to finalize their coverage plans.
"I think human resource managers are focusing on return to work protocols," said Piper Sandler analyst Sarah James. "There's a lot of fluidity, in that you don't know how many of these people who were furloughed and still on their employer plan, will remain so."