If Health Plans See Reduced Claims During COVID-19, Will They Return Excess Premiums To Clients?
Monday, June 01, 2020
Options versus in-person care. There is increasing evidence that many carriers, health plans and insurers are seeing a drop in claims and costs – even amid rising COVID-19 care. According to Moody’s, US health insurers are expected to remain profitable under the most likely scenarios.
There are other reasons insurers are financially strong right now. President Trump’s Tax Cuts and Jobs Act meant billions of dollars in savings for carriers due to corporate tax reform. Another positive for many health plans is the Supreme Court’s recent decision in Maine Community Health Options v. United States. This decision upholds payment of $12 billion in ACA Risk Corridor program payments due to insurers from 2014 to 2016.
The ultimate financial impact of COVID-19 on insurers is unknown. Whether there will be a significant “snap back” on elective care, whether members resume traditional patterns of receiving in-person care versus telehealth, and whether procedures put off due to COVID-19 are ultimately rescheduled and therefore not eliminated are all open questions. If there will be a recession or resurgence of the virus is also unknown but, for now, health plans are seeing better financial results while so many businesses and individuals are struggling to pay their bills. Some insurers are taking action to share short-term gains with those directly affected by the pandemic. UnitedHealth Group announced in May that it was issuing credits applied to premium billings ranging from 5% to 20% for customers served by its commercial fully insured benefits. Many dental carriers including BCBSRI and Delta Dental of RI have announced similar programs for their dental customers.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThis type of credit/refund/rebate may not only be the right thing to do, it may also be required. Under the medical loss ratio (MLR) provision of the Affordable Care Act, health insurance issuers must submit data on the proportion of premium revenues spent on clinical services and quality improvement – known as MLR. And, if this percentage doesn’t meet minimum standards – at least 80% or 85% of premium dollars on medical care depending on whether they cover small or large group plans – they’re required to provide customer rebates.
MLR rebates, which can be in the form of a premium credit or lump sum payment, are based on a three-year average. In April, the Kaiser Family Foundation used preliminary data to estimate that insurers will be issuing a total of about $2.7 billion in 2020 – more than double last year’s amount. The average rebate per member is expected to be $1,850 per member for small groups and $110 in the large group market, funds that will be paid out later this year.
In a way, UnitedHealthcare's credits to customers are accelerating those rebates. Will other health plans follow suit? While companies like BCBSRI, Tufts Health Plan and Harvard Pilgrim Health Care have announced they’re waiving cost-sharing related to treatment for members with COVID-19, none have announced credits. With many dental plans and most of the major auto insurers like Allstate, Amica, and GEICO offering paybacks or policy credits during the pandemic, stay tuned to see if the trend of giving back sweeps into the healthcare space as well.
Sam Slade is Managing Director, Employee Benefits, at The Hilb Group of New England, where he delivers consultative advice and services. He is an industry veteran with extensive experience in all aspects of employee benefits, including underwriting, plan design, communications, compliance, and analytics, with a particular focus on alternative funding and self-insurance. Most recently, Sam served as Vice President of the Employer Segment at BCBSRI, where he worked to help the company evolve its self-insured capabilities. Previously, he was the Employee Benefits Practice Leader for USI in Rhode Island after selling his own firm, Bluff Head Enterprises, to the company in 2011. Sam’s career started with The Travelers.
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