Premiums for health insurance for individuals and small group markets are not expected to see large adjustments from carriers in 2022, a new report has found. Regional differences in health care delivery might result in some variation of premiums, due in large part to the COVID-19 pandemic, the report said.
The new report, released by the American Academy of Actuaries, looked at trends in premiums as the process for filing rate increases for 2022 is already underway.
“Insurer premium rate filings for approval by regulators for 2022 are generally based on the last full year of claims experience, 2020, with adjustments,” said Academy Senior Health Fellow Cori Uccello. “Carriers’ premium rates may include adjustments due to COVID-related or non-COVID-related costs and utilization that are expected to be different from that base year.”
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The report noted that the ongoing issues around the COVID-19 pandemic are continuing to affect health care spending, and information on that spending will affect the 2022 premium requests. “Nevertheless, those impacts are not expected to be material,” the report said.
How the pandemic is affecting health care spending
The study looked at health care spending changes due the COVID-19 pandemic and found a number of developments. These include:
- Utilization, which dropped early in the pandemic due to stay-at-home orders and cutbacks to non-essential services but began to pick up again in late 2020. However, even as providers sought to get back to normal, utilization of some services remained below pre-pandemic levels.
- Demand on hospitals has varied—as waves of COVID-19 illness came and went, some health care systems have had to reduce non-emergency medical services to ensure hospitals had adequate staff and resources.
- Costs directly associated with COVID-19 were significant, the report said, with high-cost hospitalizations and testing becoming cost drivers for the industry. In addition, carriers absorbed much of the cost for testing and some treatment, since federal requirements discouraged cost-sharing.
- The increase of telehealth services was widely seen as necessary and helpful during 2020, but questions remain about the overall effectiveness of such services, as well as how to set reimbursement levels.
Changes in the individual and small group market
The actuaries’ report outlined changes in the markets due to the economic impacts of the pandemic. The various federal efforts to maintain health coverage during the pandemic play a role here.
For example, the report noted that individual market enrollment in the U.S. increased by 5.8% from February 2020 to February 2021. This may be due in part to larger premium tax credits and subsidies available as part of government programs such as American Rescue Plan Act of 2021 (ARPA). A more generous system of federal support for the individual market segment under the Affordable Care Act (ACA) may continue past the pandemic, if President Biden’s current proposals end up being passed by Congress.
The ACA small group market was not as affected by ARPA, but there is speculation that ending federal unemployment support might encourage a significant number of Americans to re-enter the job market and therefore be eligible for small-market insurance coverage. However, the report noted that there is mixed evidence to support this theory.
Overall, the report said, the easing of stresses associated with the pandemic would be good news for small market insurance coverage. “As the public health fears associated with the pandemic decreases, the economy continues to improve, and hiring increases, enrollment in small group coverage is likely to increase,” the report said.
The report concluded by noting that COVID-19 waves, such as that caused by the Delta variant, could hit some regions harder than others, and may result in regional differences in costs and premiums.
“New COVID-19 variants and waves in 2021 or 2022 may influence regional variations in hospitalization utilization, increase the need for vaccine booster shots, and impact how and where members seek or delay medical care,” the report said. “Additionally, changes in the utilization of certain types of services such as mental health and telemedicine could affect expected claim costs.