Health Insurance Companies Hint Rise in Premiums without Funding for Coronavirus

Health insurance companies and its employees are lobbying the government to seek financial help, hinting that treatment and testing of COVID-19 will lead to a steep increase in the premium next year. Insurance companies have asked Congress to fund in future coronavirus bills to financially help insurance companies and employers with the exorbitant price of the COVID-19 claims.

Employers themselves are under financial stress at this time, and the added burden with regards to the COVID-19 crisis is a worsening situation for them. It seems that employers will be left with no option other than to pass on the costs to employees that will result in higher premiums next year. This is the reason why employers, as well as insurance carriers, are requesting Congress to intervene and protect employer-sponsored coverage.

COVID-19 pandemic has triggered uncertainty in the healthcare system, and insurance carriers are in dilemma from now only thinking about the next year’s premiums. Besides, nobody knows that for how long the outbreak will last and how many people will be tested or hospitalized for this pandemic. According to an analysis, it is estimated that insurance carriers and employers may face $34 billion to $251 billion in costs related to care, testing, and treatment of COVID-19.

Covered California, the state’s insurance marketplace, carried out an analysis that says that private health plans premium could rise upto 40% from next year due to COVID-19 costs alone, as it will greatly depend on how many people need testing and treatment. Sixty-one percent of workers insured through self-funded plans are at greater risk for premium increases because their employers who are usually large companies pay for the healthcare costs of their workers instead of buying health plans for them.

Such plans are not subjected to the annual rate reviews carried out by the state regulators like the other plans. High care and treatment costs of COVID-19 could also lead to paying cuts or stagnant wages because employers will also be affected due to the slowing economy and high healthcare costs if their workers get sick.

In the U.S. around 170 million people are privately insured, as they have coverage either through their jobs or markets where ACA plans are sold. Therefore, the American Benefits Council is requesting Congress to fund reinsurance or risk corridor programs to stabilize premiums through federal government payments.

The chance of premium increase is coming at a time when employer-sponsored insurance is becoming expensive for workers and businesses. Even out-of-pocket costs along with premiums and deductibles have outpaced inflation resulting in wages increase for many years now.

According to the Kaiser Family Foundation analysis, employer plans in 2018 paid an average of $20,292 for hospital admissions of serious pneumonia patients, which is an illness similar to coronavirus. America’s Health Insurance Plans and Blue Cross Blue Shield Association requested congressional leaders through a letter to provide temporary federal risk mitigation programs to support the plan’s financial stability that incurs extraordinary, unplanned costs in 2020 and 2021 due to COVID-19.

Some health experts argue insurance companies may not necessarily lose money due to COVID-19. Most of the states have postponed nonessential surgeries so that thousands of people get space for the virus test and treatment.

Several members of AHIP sell plans in the individual and small group markets, here insurance carriers are prohibited from increasing the premium amount to recoup the previous year’s financial losses. Insurance companies can only increase rate, based on their spending in the coming year, and this should be reviewed by state regulators.

Insurance companies can only increase premiums if they think that this pandemic and its associated health costs continue until next year. They can also increase premium costs is they expect to face increasing costs next year too due to patients rescheduling nonessential surgeries and procedures in 2020 because of the virus. Health insurance companies participating in those markets will be submitting their initial rate filings in June, and those rates could change if more information is gleaned about the scope and duration of the outbreak.

Consumers of the Individual health insurance market will be protected from any premium increase because they get subsidies from the federal government. Perhaps, the coronavirus might lead to overall increased healthcare costs in the U.S that hit $3.6 trillion in 2018. It is expected that a risk corridor program will incentivize insurance carriers, and they would keep the premium increase percentage lower than they would without any assistance from the federal government.

A risk corridor provision is included by the House Democrats in a coronavirus response bill, but it doesn’t reach the desk of President Trump. The provision remains a priority for the party in future measures for coronavirus, according to a senior Democratic aide. However, there is a lot of disagreement between the parties, and hence it is difficult to come up with legislation and get it passed.

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