Health Insurance Rates Could Be Weirdly Stable: Actuaries

Given how surprising 2020 has been, the heath insurance pricing specialists are not eager to declare that they’re sure what prices will be like in 2021.

But, at this point, the actuaries and other pricing analysts say, it looks as if the 2021 price increases for major medical insurance coverage could end up being similar to the 2020 increases, in spite of COVID-19.

(Related: COVID-19 May Have This Shocking Effect on 2021 Health Insurance Premiums)

Gregg Fann and Dave Dillon, fellows of the Society of Actuaries (SOA), made their predictions, for all commercial health coverage, in a written commentary circulated by the SOA.

Alex Kreibich, a consulting actuary at Gallagher’s healthcare analytics unit, peered into the future in a video posted on Gallagher’s website. Kreibich focused on what might happen to the cost of the health benefits provided by large employers with self-insured health plans.

Treating many severe cases of COVID-19 could be expensive, but, the more severe the effect of the pandemic are, the less care plan members are likely to get for conditions other than COVID-19, according Kreibich.

Kreibich emphasizes in the Gallagher video that what might really happen with COVID-19 is hard to predict.

If about 5% of people in the United States get a noticeable COVID-19 infection, as many forecasts suggest, then testing and treatment costs might amount to more than 4.8% of current health care spending, Kreibich estimates.

But COVID-19 could also reduce use of non-COVID-19-related care enough to cut spending by an amount equal to about 5.4% of current spending, Kreibich predicts.

In that case, Kreibich says, the net result would be a 0.6% reduction in health care spending, according to Kreibich’s analysis.

COVID-19 could, on the other hand, lead to increased telehealth and behavioral care use, higher COBRA benefits continuation takeup rates, and, possibly, different or more expensive stop-loss contracts, Kreibich says.

“Things have been changing rapidly,” Kreibich says. “Things will continue to change over the coming weeks and months.”

At the SOA, Fann and Dillon suggest in their commentary that early indications are that, excluding the effects of COVID-19, health insurance rate trends will be similar to what they’ve been in recent years, with underlying medical inflation increasing rates by 4% to 6%.

Several key considerations could affect whether COVID-19 has much effect on rates in 2021 and later years, Fann and Dillon say.

One is whether the pandemic extends into 2021.

“Legally, insurers can’t cite 2020 losses as rationale for 2021 rate hikes,” the actuaries say. “Any rate shifts must be based on expected costs, and can’t include past losses in protective premium rates if these costs aren’t expected to persist into the next plan year.”

Another factor is whether COVID-19 reduces overall use of non-COVID-19 care for the full year to offset spending on 2020 COVID-19 care, the actuaries say.

Like Kreibich, Fann and Dillon say they insurers appear to be seeing reduced spending on elective surgeries and other forms of non-COVID-19 care.

One open question, however, is whether reduced use of non-COVID-19 care in 2020 will lead to increased use of care in 2021, Fann and Dillon say.

“There may also be increased behavioral health usage, which could impact premiums,” Fann and Dillon say.

Fann and Dillon say higher unemployment could also affect rates, by shifting some consumers from group health plan market, into the individual commercial health insurance market, or into the Medicaid plan market.

— Read Medicare Advantage to Pay Issuers a Little More for 2021 Coverage, on ThinkAdvisor.

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