While we don't yet know the full financial long-term impact of COVID-19, we do know that the pandemic upended the health care industry and will likely continue to cause premium rate shifts. (Photo: Shutterstock)
As the health insurance rate-setting season approaches, the big question on everyone's mind is, "how will COVID-19 impact health premium rates in 2022?" While the full financial impact of COVID-19 is not yet known, it is expected that the ramifications of the pandemic will be experienced for years to come. Based on this, there are several key factors in evaluating health insurance rates for next year.
First, it's important to keep in mind that insurers are required to develop next year's rates based on next year's expected costs only. Past losses are not allowed to be included in prospective premium rates if those costs are not expected to persist. Although the bulk of the pandemic seems to be behind us (2021 costs), people are still getting sick. Therefore, the health costs of fighting the virus will likely put upward pressure on 2022 rates.
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It's also crucial to recognize that health insurance rates will vary widely based on individual states and marketplaces. This is always true for insurance rate-setting, but is especially pertinent when you factor in the wide variability in COVID-19 policies, and infection rates, different states experienced throughout the pandemic.
Pent-up demand
Adding to this COVID-related upward pressure on prices is the fact that millions of Americans postponed trips to the doctor and elective surgeries in 2021. Roughly 20% of U.S. adults said that they or their household members delayed receiving medical care or were unable to get care at all due to the crisis, according to a recent study from Harvard T.H. Chan School of Public Health, the Robert Wood Johnson Foundation, and National Public Radio.
Now, with coronavirus vaccines widely available, Americans are expected to resume seeking long-delayed care. In addition to increased demand, insurance claims could also reflect the consequences of letting risky health conditions go untreated during the pandemic. There will likely be varying levels of pent-up demand in different markets, creating a wide range of potential rate-changes – and the potential for positive or negative pressure, depending on the market.
The Affordable Care Act
Of all the curveballs COVID-19 threw at the health care industry, last year's job layoffs caused some of the biggest concerns. Some 7.7 million Americans who were laid off during the pandemic lost their employer-sponsored health coverage as of June 2020. Those plans also covered some 6.9 million dependents, impacting up to a total of 14.6 million individuals, according to the Commonwealth Fund, a private foundation that supports health care issues. In response, Congress passed the American Rescue Plan (ARP) Act, which expanded health insurance eligibility and subsidies for millions of Americans. In addition, President Biden announced a Special Enrollment Period, April 1 to August 15, to give unemployed workers the opportunity to take advantage of these expanded benefits.
Millions of Americans enrolled in health coverage under the Affordable Care Act, in response to these expanded incentives. In early May, the Centers for Medicare & Medicaid Services announced nearly 940,000 Americans are newly signed up for coverage and about 1.9 million returned to obtain more generous tax credits.
Additionally, the ARP extended eligibility for health insurance subsidies to people buying their own health coverage on the federal marketplace who have incomes over 400% of the poverty line. The law also increased the amount of financial assistance for people with lower incomes who were already eligible. Both provisions are temporary, lasting for two years, and are retroactive to January 1, 2021.
Overall, the ARP makes significant changes to bolster the ACA and improve marketplace access and affordability, which will likely lead to further stabilization, and possibly a decrease, in health insurance rates.
Telehealth
One positive force that will counter the upward pressure on rates is telehealth, which experienced explosive growth during the pandemic. Widespread use of telehealth is expected to continue, as consumers recognize that the technology saves time, reduces costs, and offers new-found convenience.
In fact, a study published in JAMA Network Open found that while the use of in-person medical services dropped by 23% in March and 52% in April 2020, and that telemedicine services grew by more than 1,000% and 4,000%, respectively, within this timeframe. If this trend continues, it will likely lead to a decrease in health insurance rates too.
While we don't yet know the full financial long-term impact of COVID-19, we do know that the pandemic upended the health care industry and will likely continue to cause premium rate shifts in the year to come. Actuaries will continue to evaluate new data and trends to ensure premium rates reflect the latest marketplace experience, including the range of potential impacts outlined above.
Dave Dillon is a fellow of the Society of Actuaries and a senior vice president and principal with Lewis & Ellis.
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