3 Economic Uncertainties That Payers Face Amid Coronavirus Crisis

Effects of Unemployment on Enrollment

With unemployment skyrocketing, one of the most pressing questions is how that will affect the payer’s commercial business.

UnitedHealth Group was expecting membership to fall for fully- and self-insured customers in the first quarter of 2020, as did occur. From the end of December 2019 to the end of March 2020, the payer lost 610,000 UnitedHealthcare medical customers, including Medicare, Medicaid, and international clients, the press release detailed.

The payer assumed, however, that this would level out over the course of the year. With the explosion of coronavirus cases and regulations toward the end of the first quarter, this assumption is becoming more dubious, largely because of business closures.

The churn among employer-sponsored health plans and Medicaid and the individual health insurance marketplace may offset the effects of this drop. UnitedHealth Group opened up a special enrollment period for the individual health insurance marketplace, capturing tens of thousands of enrollees, Wichmann shared.

Effects of Delayed Elective Care

For the first quarter, the effect of delayed elective treatments had little to no impact.

However, it wasn’t until toward the end of March that CMS discouraged medical professionals from performing elective and non-essential procedures. The financial impacts of this would begin to show significantly in the second quarter, John Rex, UnitedHealth Group’s chief financial officer, indicated.

“Offsetting this impact, we would anticipate the second half medical care ratio could be meaningfully elevated,” Rex said.

Along with that dire prediction, though, UnitedHealth Group leaders expressed a hope that by the second half of the year patients would be able to receive more comprehensive care.

Effects of Extended Payment Grace Periods

Payers are offering extended payment grace periods in order to help employers and members meet their premium payments, including for the recently unemployed and furloughed.

This is not an unusual practice, even in ordinary times. For UnitedHealth Group, grace periods and payment plans make up approximately 0.4 percent of their premium base for an average month.

For the premiums due on March 1, premium extensions more than doubled their usual portion of UnitedHealth Group’s premium base, to hit one percent. And for the premiums due on April 1, the extensions tripled from March’s number to hit around three percent as of April 15.

“A little bit elevated, but we're going to continue to work with our customers on payment plans to give them the options for coverage that they need,” commented Dirk McMahon, chief executive officer of UnitedHealthcare.

While certainly payment grace periods may not have the same impact as elective care or unemployment, this presents yet another area which has taken a turn in response to the coronavirus.

All three of these factors could have minor or major influences on premiums for next year, depending on coronavirus-related events in the coming months. Payers are in the process of setting those premiums and the fluctuating circumstances present a particular challenge for this process.

“We're closely monitoring the emerging COVID-19 information and including things like the claim experience from our members who have been diagnosed with the disease, as well as the abatement of other procedures,” McMahon mentioned. “We're going to continue our commitment to pricing to our forward-look of costs, including estimates of things like significantly increased testing costs as well as hopefully the cost of the vaccine. Our view of the 2021 costs will continue to evolve as we learn more about the virus.”