SummaryFaced with a rapidly evolving healthcare environment, there are a number of important uncertainties that commercial insurers will need to consider when planning for the future
Commercial health plan issuers are prioritizing emergency responses to protect the health and safety of members by using new flexibilities to facilitate access to healthcare despite the challenges created by COVID-19. Simultaneously, these plan issuers are already preparing for 2021. The significant uncertainties related to economic conditions, utilization, COVID-19 incidence, and the requirements and availability of testing, diagnostics, and vaccination are complicating prospective planning for quality and premium setting initiatives.
COVID-19 is continuing to create ripple effects within the healthcare industry and in the larger economy. These effects are causing immediate impacts on enrollees (e.g., threats to coverage and care, changes in how they use healthcare resources, what types of services they are using), care management opportunities, and plan operational and reporting requirements. Federal and state legislation and guidance are aiming to increase member access to COVID-related care and generally reduce some access challenges (e.g., through telehealth expansions, scope of practice and licensing relaxation, site of care flexibilities). It will be important for commercial plan issuers to consider these implications for future years and strategize to mitigate any negative impacts on enrollment, spending, quality, and risk adjustment transfers.
The commercial health coverage market should consider the following areas.
COVID-19 transmission concerns have caused extensive and unexpected disruptions in patterns of care. Certain medically necessary or elective procedures are likely to be rescheduled, but timing and system capacity may require delays into 2021. COVID-19 related testing and treatment, including vaccination, are also likely to remain significant uncertainties, with higher costs and utilization likely extending into 2021. New federal requirements for commercial plans to cover these services without cost-sharing and often without utilization management or network parameters could further increase costs and create claims adjudication and data collection challenges.
Enrollment and Eligibility
Major economic disruptions are causing millions to lose their jobs or experience wage cuts, furloughs, and the inability to work, triggering many to lose their employer-sponsored health coverage. The rising unemployment rate is subsequently causing substantial shifts in coverage within the market. Understanding who and how many people are being impacted, what sources of coverage they may shift into or out of, and how long these changes will last are all critical to commercial market plans as they prepare for 2021.
We are already seeing some signs of these changes as individuals move between Medicaid and the Affordable Care Act exchanges, make early transitions into Medicare, or become uninsured. The longer the economic impacts are felt, the greater the likelihood that commercial coverage, especially for the nearly 180 million enrolled in the employer market, will be significantly affected in 2021. Employers may reduce their overall coverage offerings to all or to certain groups (such as part time staff), reduce contributions to health savings arrangements or premiums, or look to restructure the plan’s risk pool by shifting some classes of employees into the individual market with new HRA flexibilities. Plan issuers should consider how changes in coverage eligibility and uptake may impact minimum participation requirements or lead to higher PMPM premiums and expenses.
Premium increases are likely on the horizon for 2021 for many plan issuers and enrollees. The magnitude of the impact will be market, region, and even plan dependent given unequal experiences in 2020. These differences will translate into 2021 premiums (both for health coverage and for stop loss and other insurance products)
However, since not all plans are priced/underwritten in the same way, this could cause variability in premium rating, employer coverage and funding decisions, and plan profitability. Small group and individual insurance premiums are rated on a go-forward basis, this sector could be more impacted by the future market uncertainties, but less impacted by 2020.
Other markets, especially large employer plans, are more heavily rated based on recent experiences and may see premiums more influenced by 2020 claims. While the availability of Advanced Premium Tax Credits for many exchange enrollees may help mitigate the individual market premium impacts, that will not be the case for the rest of the commercial market. Premium changes could lead to enrollment shifts and changes in both the overall uptake and what types of plans individuals choose in 2021.
For some plans and employers, COVID-19 may have altered perspectives around certain benefits and may lead to largescale changes in how care is covered, reimbursed, and how employers and employees share in those costs. Many employers are responding to COVID-19 by augmenting the inclusion of benefits like telehealth or adding new flexibilities around sites of care (like home infusion) or utilization management. Over the long term, benefit strategies may be very different than they are today. Depending on the receptiveness of enrollees to telehealth, employers may embrace telehealth in an even larger way to expand care access and lower costs for general evaluation and management visits. Payer financial and in-kind incentives can further trends toward receiving care in lower cost settings. However, some employers facing higher care costs or financial/risk pool uncertainty may choose to modify benefit design by increasing cost sharing, deductibles, restricting networks and formularies, and increasing utilization management—all trends witnessed during the 2008–2009 economic recession.
Plans and employers will not be equally affected by COVID-19. This could be particularly impactful in the individual and small group markets in states that have had hot zones of COVID-19, which may lead to significant transfer payments from issuers in less impacted areas of the state to issuers offering plans in the hot zones. Even outside of hot zones, issuers that are better able to reengage providers and patients to collect diagnoses could cause similar transfers. The magnitude of these transfers could impact plan stability, premiums, and even market participation in future years. Although CMS recently postponed the 2019 HHS-RADV audit process until 2021, plans will still need to attempt to collect risk adjustment information to avoid significant issues with transfers. The delays in sharing risk adjustment information will add uncertainty.
Quality and Care Management
The inability of plans and employers to engage with members to manage their chronic illnesses or risk factors will create new pressures for 2021. The lack of intervention opportunities could lead to higher long-term costs and might affect value-based arrangements and the overall risk in the pool in the more near-term. While some plans are trying to proactively reach out to members, their ability to engage with members and providers on overall disease management may be diminished. The CMS’s recent guidance suspending plan quality activities may make it even harder to effectuate quality improvement activities and collect critical data. These challenges will impact quality ratings in future years.
Medical Loss Ratio
Driven by delayed expensive elective surgeries and decreased overall utilization, insurers could see a reduction in medical loss ratio (MLR) in 2020. This might prompt plans to make large MLR refunds to members. However, this might pose challenges in 2021 when these outgoing payments could be used to mitigate the impact of an uptick in COVID and delayed services on top of more typical utilization trend. Plans may wish to investigate the budgetary impacts of these delayed medical procedures and consider what care might be transitioned into 2021 and how 2021 MLRs might be impacted.
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