Toward the end of March, Covered California issued a forecasted increase of “4 to 40” percent for January 1, 2021, health insurance premiums on their platform due to expected COVID-19-related claims alone. The alarms were sounded.
Yet, as you may have seen in recent headlines, medical loss ratios (MLR) at some of the publicly-traded health insurers such as United Healthcare (UHC) and Aetna are coming in at around 70 percent for the second quarter of 2020. For comparison, in 2019, UHC reported an MLR of 83 percent while Aetna reported at 85 percent.
This year’s decreases in medical loss ratios have been widely attributed to patients staying home instead of seeking care—either due to fear of going out, or because their provider’s office was closed. And many of the appointments that have taken place since March have been virtual visits via telephone or video, a cost-effective trend we are hopeful will continue post-Covid due to some relaxation in reimbursement requirements (such as California’s AB 744).
Additionally, predating COVID, another market force is at work in the pharmaceutical sector. Drugs at the retail point of sale have stagnated over the past couple of years—as opposed to their usual dramatic increase—according to the Bureau of Labor Statistics CPI for prescription drugs.
And there are reasons to believe the retail cost of most drugs will hold steady, with new online pharmacies like Ro, new generic manufacturers like Civica, and better-aligned relationships between health carrier and PBM (e.g. Anthem rolling out Ingenio, Aetna being acquired by CVS-Caremark, and Cigna acquiring Express Scripts).
In private conversations, health insurers warn that much of the reduction in health claims is simply deferred—as opposed to foregone—care.
The thinking goes that when a patient skips their physical, or an important treatment, this doesn’t really reduce costs, but simply defers—and even exacerbates—costs in the longrun, as that tumor wasn’t located in time, or that diabetes wasn’t kept in check, leading to expensive care and/or worse health outcomes over the coming years.
While these are real longterm possibilities, I’m happy to report that what we’re generally seeing in health insurance renewals for the fourth quarter 2020—and the limited data we have so far for first quarter 2021—have been very tame.
Additionally, some medical (and dental) carriers such as Anthem and UHC have already issued substantial rebates to policyholders, one-time payments ranging from 5 to 20 percent of a single month’s premium.
Moreover, we’re expecting historic MLR Rebates this year. Not sure what an ACA MLR rebate is, or how to handle one? See here. Some carriers are sitting on so much excess cash they are choosing to make these MLR distributions early; Anthem for one will have completed their rebates by the end of August, at least a full month ahead of the required timetable.
So while we can’t know what the longterm looks like in healthcare costs, for now there seems to be some glimmers of hope.
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