COVID-19 and its Impact on 2021 Employee Benefit Premiums
If there is one thing that experts agree on is that health insurance premiums in 2021 will rise. It is just a matter of how much. The Coronavirus (COVID-19) has not only impacted our economy but is having a huge impact on insurers. Southeast Michigan is seeing a higher than average COVID-19 utilization, with higher remote services being used and inpatient costs stemming from the virus greater than other areas.
Small groups rates on average saw a 3.8% increase in 2020. Even with all the uncertainty during this time, experts are predicting increases to insurance premiums above the recommended levels allowed by the Affordable Care Act. According to the State of Michigan Department of Insurance and Financial Services (DIFS) Insurance companies are required to file their small group forms, rates and binders by May 13th and individual insurers for all on and off marketplace plans by June 10th with the Centers of Medicare & Medicaid Services (CMS). If these dates are not extended and insurance companies are setting rates based on unforeseen future impacts, massive increases may continue into the 2022 plan year. Although the Affordable Care Act has placed a 10% limit on how high insurers can increase premiums before being subject to state regulator reviews for overpricing, what does your plan look like with a 10% increase in 2021 and 2022? Some experts are even predicting increases upwards of 40%. That type of increase would be devesting for an organization of any size.
What factors are going into these potential increases?
- Insurance companies are absorbing costs incurred by those with COVID-19, such as testing, treatments, inpatient care, co-payments and deductibles.
- Insurers now are seeing a large decline in claims payed out to hospitals, physicians and other providers due to nonessential, elective surgeries and procedures restricted by executive orders. Insurers expect to see a large surge of claims as restrictions are lifted.
- Those patients putting off surgeries, procedures or treatment due to COVID-19 may wind up in the ER, due to the delay in elective surgeries. This delay will likely cause conditions to be significantly worse when finally treated causing the cost of the claims to increase substantially.
- Hospitals, physicians and other providers are losing significant revenue from lucrative elective procedures. These institutions are pouring money into COVID-19 patients, additional personal protective equipment, transforming parts of hospitals into COVID units, overtime pay for employees, and setting up testing facilities. We are already seeing a significant loss of hospital revenue, which may result in higher than average pricing in 2021 and beyond.
- Coronavirus vaccines and antiviral medications most likely will not be available until 2021 and costs of these treatments are unknown at this point. Costs of these treatments will most likely corelate in, increased premiums in 2022 as well.
- Many employees who have purchased individual insurance on the marketplace are losing their jobs and may cancel their insurance. Less people on the plans will result in higher premiums for those remaining on them.
- Small businesses hit hard by this pandemic, may opt to eliminate insurance policies altogether and instead opt to subsidize employee’s pay in order to recoup losses.
- The suggestion of a second surge of Coronavirus in fall will have serious impact of 2022 plan years as 2021 rates will have already been established.
- The ability for those recovering from Coronavirus and developing antibodies so that they will not develop the illness again at this point are not confirmed. There is a possibility that those seeking treatments for Coronavirus may seek additional treatment at a later date, increasing those costs exponentially.
The question is what, as an employer, can you do now to mitigate detrimental increases to your health plan in the coming years?
The answer involves being proactive now and considering a move towards a Healthcare Coalition. Coalitions are built on strong foundations of experience, shared reinsurance pools and a hefty toolbox of education and services. Employers are groomed to become healthcare cost cutting engines, where employees are engaged and advocates of their own healthcare spend.
Coalitions tackle reducing healthcare costs from all angles. Let’s take a look specifically at the BenePro Healthcare Coalition. This coalition is part of a larger coalition out of the Boston area. This coalition currently has more than 30,000 lives and is growing.
After a through screening of your population, your organization will join this large purchasing pool which shares a common reinsurance market. The system is flexible and allows employers to remain independent as to the plans they choose.
Once you are part of the Coalition, we address further cost reduction strategies. These include, Pharmacy carve-out (variable specialty co-payment, international sourcing, manufacturers assistance programs, etc.), population health management, targeted wellness programs, nurse management, predictive modeling and direct contracting are just some of the tools available.
Now that the 50-1,000 person group is part of a 30,000+ Coalition, they have bulk purchase power, stability and predictability. As part of the larger group, the chances of a bad claims year fall to less than 1%.
Everyone in the Coalition is individually, a cost-cutting engine. This cost-cutting causes the estimated annual pooled premium usage to reduce and at the end of the plan year members typically see a substantial return of premium. In other words, a check returned back to the group.
If you have ever thought about self-funding and wondered if it was right for your company or thought your group might not be large enough to have it make sense, now is the perfect time to make a move.
BenePro is hosting a webinar to discuss how moving towards a coalition now might be your best chance of mitigating risk in the future.
Choose from one of the following dates, Wednesdays at 11:00 a.m.
June 17, 2020
July 22, 2020
August 19, 2020