COVID-19 Impacts on Risk Pool, Costs Stir Rate Setting Uncertainty

The coronavirus pandemic impacts on the individual health insurance market risk pool and healthcare costs for 2021 are infusing uncertainty into the 2021 rate setting process, America’s Health Insurance Plans (AHIP) explained in a recent infographic.

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“With discussions around premium costs in the individual market for 2021 underway, there is a growing and understandable concern about the impact of COVID-19 on the nation’s health care system, increasing costs of medical care, and other issues,” stated the press release.

The infographic identified two major areas of uncertainties: factors related to the risk pool and 2021 healthcare costs.

The individual health insurance marketplace risk pool will be influenced by the unemployment rates. While many recognize that the economic plunge will affect whether members can afford premiums next year, the AHIP infographic shared, it is hard to pinpoint with any certainty what the exact impact will be.

Affording a premium is already a challenge in 2020. Nearly three out of four participants in a recent Sidecar Health survey stated that affordability was preventing them from finding coverage after becoming unemployed. Of those, almost half (47.1 percent) were in the market for a premium of $50 per month per member or less. Nearly 28 percent were looking for a health plan with a monthly premium of $100 per month per member or less.

However, with coronavirus, the economic barriers may worsen.

“COVID-19 has had a very real impact on the economic, physical, and mental health of millions of Americans. Our members are working through this uncertainty to strengthen access to affordable care as the fight against the coronavirus continues,” Jeanette Thornton, senior vice president of product, employer, and commercial policy at AHIP, said in the press release.

State special enrollment periods will also be an unusual circumstance to factor into premium rate setting, AHIP stated.

Twelve of the thirteen states with state-based exchanges have opened up special enrollment periods. While special enrollment periods are not necessarily an unusual circumstance in and of themselves, many states have seen a much higher response rate to the special enrollment period than is typical.

California’s enrollment increased by 250 percent compared to the special enrollment timeframe in 2019. Connecticut’s special enrollment rose by 70 percent from the 2019 timeframe, and the District of Columbia saw 66 percent more enrollees compared to last year. States reported that the enrolling demographic trended younger this year.

Risk pool health factors contribute to the uncertainty around 2021 premiums, as well. Questions about the frequency and severity of coronavirus cases, the long term health effects on coronavirus survivors, and the trajectory and duration of the outbreak as a whole remain unanswered.

Aside from unpredictable circumstances in the risk pool, future healthcare costs linked to the coronavirus are likewise unknown and will have an effect on rate setting.

Not only are actual testing and treatment costs still unsettled, but the cost of the new vaccine and its release date are unforeseeable.

Delayed and deferred care will also come with a price tag. Over a third of patients who have deferred care due to coronavirus intend to receive care in the next couple of months, a Kaiser Family Foundation study recently found. But it is difficult—if not impossible—to measure how much the intervening gap in care has worsened conditions and how much more care delivery will cost as a result.

Regulatory uncertainty once prevented the ACA markets from gaining traction quickly. Now some of that instability could reemerge as a factor in 2021 rate setting processes.

Changes in state and federal coverage regulations could have effects on how much payers will need to pay, but there is no way of projecting what alterations may take place. Risk mitigation programs also factor into that, as no one knows what those measures will look like in 2021.

“COVID-19 dramatically changed the health care landscape—in 2020 and for years to come,” Thornton added. “But what hasn’t changed is our members’ commitment to improving the health of the communities they serve.”

In light of these factors, some have suggested changes to the rate setting process. Many experts are recommending rate pursuing strategies such as reinsurance and risk corridors which were established in other periods of rate setting uncertainty.

Despite the challenges, some states are seeing positive growth in their individual health insurance marketplaces, probably fueled by unemployed consumers’ growing interest in the market.

Washington State recently announced that, for the first time since the ACA went into effect in 2014, the state would have at least two payers on the individual health insurance market in every county. Fifteen payers have filed over 180 plans on the state’s individual health insurance market, with two brand new entrants.

“There probably will be more entry and the individual health insurance markets are going to get more competitive, which is good for consumers,” Katherine Hempstead, a senior adviser from the Robert Wood Johnson Foundation, told HealthPayerIntelligence.

“It does make them want to be competitive in their pricing. It's not like at the beginning of this, where the carriers kind of acted like they're doing people a favor to participate. I think now they're going to be more serious, and they're not going to want to over price.”