COVID-19 May Impact Employer-Sponsored Plans Less Than Expected

The blow to employer-sponsored plans in the final three quarters of 2020 could be lower than anticipated largely because coronavirus impacts have concentrated on lower income populations, Robert Wood Johnson Foundation researchers asserted in a recent study.

These estimates are still preliminary, using data from the Department of Labor.

The researchers found that in the final three quarters of 2020, 48 million Americans—around 14.5 percent of the US population, according to the US Census Bureau—would be in a family in which at least one worker lost his job for coronavirus-related reasons.

Of these 48 million people, about one in five would also lose their employer-sponsored health plan (10.1 million).

These individuals will end up scattered throughout the health payer industry.

Employer-sponsored health plan enrollment

About a third of those who lose an employer-sponsored health plan will get coverage from a family member’s employer-sponsored health plan (32 percent).

Coronavirus-related influences will likely bring down overall enrollment in employer-sponsored health plans by 7.3 million insured lives.

To explain why employer-sponsored health plan losses could be less than previously predicted, the researchers pointed to the fact that most of those who are losing employment did not have employer-sponsored health plans before the pandemic started.

“These estimates align with evidence that the COVID-19 recession is hitting people with low incomes and less educational attainment the hardest,” the study noted.

Medicaid enrollment

Another 28 percent of those who lose their employer-sponsored health plan will enroll in Medicaid.

Medicaid and Children’s Health Insurance Program (CHIP) enrollment will rise by 6.1 percent, the researchers said. Losing a job could push uninsured individuals as well as those on the marketplace toward Medicaid and CHIP coverage, since loss of employment can be a qualifying factor for coverage by these public payers.

Continuous enrollment, a stipulation of the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, will also help maintain Medicaid and CHIP enrollment. Beneficiaries may remain on Medicaid and CHIP longer than they normally would.

Nongroup, Individual health insurance market enrollment and churn

Six percent of those who lose their employer-sponsored health plan will end up in the individual health insurance market.

“Small net changes in nongroup coverage conceal larger movements in and out of this market which encompasses the ACA marketplaces (both with or without subsidies), the Basic Health Program (available in New York and Minnesota), and ACA-compliant plans sold outside the marketplaces,” the researchers noted about the individual health insurance market.

One small net change would be that the individual health insurance market could lose half a million Americans to Medicaid.

On the flip side, the researchers estimated that 700,000 would enroll on the individual health insurance market.

Meanwhile, within the market, there would be some shifts in subsidized healthcare coverage, as 200,000 enrollees would no longer have premium tax credits and 400,000 enrollees would gain premium tax credit plans.

But qualifying for premium tax credits does not necessarily mean enrollees will take advantage of them. Whether a former worker seeks out premium tax credits can be affected by her expectations of regaining her position or whether she expects to max out her brand new plan’s deductible in the matter of months between losing and regaining employment.

“Consequently, if unemployment remains high at the end of the calendar year, the demand for marketplace coverage may increase to a much greater extent during the 2021 open enrollment period,” the researchers explained.

For those caught in this situation, a previous study recently showed that many employers are providing furloughed employees with healthcare coverage as they wait out the intervening months between the end of work and returning to their positions.

Uninsured population growth

Over half of those who are uninsured will be eligible for Medicaid or subsidized coverage through the Affordable Care Act marketplaces, but will not use it (55 percent).

This is just one factor that will contribute to 3.5 million people who had employer-sponsored health plans being uninsured.

However, Robert Wood Johnson Foundation researchers also predicted that half a million Americans who were already uninsured when the pandemic started will become eligible for Medicaid in 2020. These will leave the uninsured population to enroll in Medicaid.

Thus, after factoring in those who become eligible for Medicaid coverage, the uninsured population as a whole will rise by 2.9 million by the end of 2020.

Medicaid expansion states versus nonexpansion states

Medicaid expansion states will see a higher decline in employer-sponsored health plan coverage (dropping 5.2 percent) than nonexpansion states (dropping 3.9 percent) because expansion states tend to have higher employer-based coverage.

Medicaid and CHIP enrollment in expansion states will rise by 7.3 percent. Expansion states will see a 1.8 percent decrease in individual health insurance market enrollment, largely due to more individuals becoming eligible for Medicaid. Around a third of those who lose their employer-sponsored health plan in expansion states will become uninsured.

In contrast, in nonexpansion states enrollment will only increase by 3.1 percent. Individual health insurance marketplaces enrollment will rise by 5.8 percent in nonexpansion states where Medicaid access is more restricted. Over half of those who lose their employer-sponsored health plan in nonexpansion states will become uninsured.

Experts have already been predicting a lot of churn within the health payer industry in 2020—particularly in the individual health insurance market—largely due to coronavirus and unemployment. As payers set their rates, the uncertainty regarding churn between markets prevented some from including the effects of coronavirus in their premium calculations.