Crying for Help, or Crying Wolf?

The Coronavirus pandemic has unleashed significant uncertainty in the U.S., straining our health care system and the ways we finance it. On the individual level, millions of people face new fears about how they will be able to access health care when they need it, having lost their jobs, which may or may not have included health insurance coverage. We know that Black people and other communities of color in our country are highly disproportionately suffering from both the health and economic impacts of the pandemic, and that systemic racism is at the root of these inequities.

Yet, right in the midst of such uncertainty and hardship, some private insurers have sounded the alarms, predicting that the projected cost of covering COVID-19 services will mean staggering increases in health insurance premiums for 2021

Referring to these projections, health insurance trade groups, as well as states such as Pennsylvania and California, are calling on congressional leaders to provide federal funding to mitigate the financial risks associated with COVID-19 and stabilize the private insurance market. Yet other analyses suggest health insurers performed better than expected in the beginning of the year and even as COVID-19 claims rise in hard-hit regions, earnings for the full year should even out.

What should consumer advocates make of this premium projection debate? And what can advocates be doing to protect consumers from unreasonable premium hikes this rate review season?

The Arguments for Extreme Rate Hikes

The insurance industry’s position is driven by three key concerns.

  1. The Coronavirus pandemic is not a one-time event, but rather will spill into 2021. Insurers argue that the pandemic increasingly looks like a lingering public health crisis, feeding into 2021 projected outlays. This is an important point because issuers can only calculate premium rates based off projected costs into 2021 – not off of the financial losses they are experiencing right now.
  2. Lower demand for elective procedures today means higher costs tomorrow. The Coronavirus pandemic has forced many people to delay elective surgeries, office visits, lab tests, and outpatient care. While this translates into savings today for insurers, these delays could mean significant costs in 2021, driven by both pent-up demand as well as possible complications from delayed access to care.
  3. If capital reserves are depleted in 2020, insurers will have to raise rates. If COVID-19 costs are dramatic enough to force insurers to dip into their capital reserves (which are accumulated for scenarios like this present pandemic), then insurers could be legally obligated to increase rates in order to meet statutory requirements for future emergencies.

The Arguments Against Extreme Rate Hikes

Those skeptical of insurer projections focus on three important points.

  1. Insurers cannot assume the present scenario will persist into 2021. Rate adjustments are not a tool to make up for lost profits in 2020, but rather must be based off projections of future outlays for the year 2021. Regulators should be attentive to the actuarial assumptions underlying insurers’ cost projections.
  2. Capital reserves should act as a buffer against – not a driver of – premium increases. Dampened demand for elective procedures due to social distancing can help insurers build up their capital reserves in 2020. Insurers can then dip into these higher reserves to protect subscribers from premium hikes in 2021.
  3. Those most severely impacted by the pandemic are often not in the private market. Older adults and low-income individuals have been more likely to be hospitalized and incur significant costs due to COVID-19. Yet their health care payer is more likely to be Medicare or Medicaid – not a private insurer in the individual or small group market. Furthermore, influxes of patients moving from the employer-sponsored market into individual marketplace due to the Coronavirus’ economic impacts may act to stabilize the risk pool as its size increases.

Consumer Advocacy Strategies to Shield Consumers from Premium Hikes

Under the Affordable Care Act, state insurance commissioners in all but Oklahoma, Texas, and Wyoming are responsible for assessing and approving rates for individual and small group plans. While the authority of regulators varies state to state, advocates can use their state’s rate review process to shield consumers from excessive premium hikes. Consumer advocates can:

  • Push for clearer rate justifications. Urge state regulators to require issuers to clearly outline and justify the projected amount of rate increase due to the Coronavirus.
  • Encourage state regulators to allow insurers to submit provisional rate filings. A provisional filing process will allow insurers to submit a supplemental filing later in the summer when there will be a better understanding of projected COVID-19 costs.
  • Advocate for transparency and opportunities for consumer input.Connect with your state division of insurance and ask them how they plan to communicate premium changes to consumers.
    • Will there be an informational website with clear, consumer-friendly information outlining the rate review process and proposed premium changes?
    • How can consumers weigh in if public hearings may not be possible due to social distancing precautions? 
    • Elevate consumers’ stories through the media. Work with local media outlets and leverage social media to share consumer stories focusing on how they will be harmed by spiraling premium prices, especially during this time of extreme economic uncertainty for many families.   

Although it remains to be seen if Congress will inject federal funds into the private insurance market as the industry continues to lobby for, CMS has responded in part to insurer anxiety by extending the filing deadline for 2021 rates.

In the meantime, consumer advocates play an important role in protecting consumers from harmful and unreasonable health insurance premium increases.  

This post was authored by Marissa Korn, former Program and Advocacy Coordinator at Community Catalyst during a return internship this spring.