A drop in health care costs is projected to keep insurance rates low in 2021, but long-term worries about the COVID-19 pandemic are raising concerns about potential spikes in future years.
Final rate increases in the individual market are under 5 percent in places like Idaho, the District of Columbia and Minnesota. Several states, including Hawaii and Oregon, are even expecting price drops.
The absence of headline-grabbing premium hikes removes one political hazard for President Donald Trump in an election year already fraught with health care battles, from the pandemic, prescription drug prices and surprise medical bills to Nov. 10 Supreme Court arguments over the 2010 health care law.
In the closing days of the 2016 campaign, Trump repeatedly criticized newly announced double-digit premium increases for voters who got insurance through the federal HealthCare.gov website, especially in battleground states such as Arizona, Florida and Pennsylvania.
“You’re going to have such great health care at a tiny fraction of the cost, and it’s going to be so easy,” Trump said at an October 2016 rally in Florida.
Four years later, Trump is trying to kill the 2010 law in court and promising to replace it with a nonexistent coverage plan he and his officials have declined to detail, and health care is once again polling as one of voters’ top issues.
The minor cost changes mirror trends in recent years as insurers continue to adapt and expand in a marketplace stabilizing after steep increases from changes made by Trump and Republicans in 2017. Premium increases for large employer plans, which are separate from the health care law’s marketplace plans, have also remained modest.
The pattern is dispelling fears about any immediate impacts that COVID-19 might have on consumers’ insurance costs, although concerns about pent-up demand, vaccine prices and the ongoing pandemic are raising expectations that costs could increase in the future.
“To a large degree, we think 2021 is likely to be more challenging, not less, than 2020,” Brian Pieninck, president and CEO of CareFirst BlueCross BlueShield, told CQ Roll Call. Future challenges are leading some insurers to ask Congress for federal assistance in any upcoming pandemic relief package.
Insurers initially feared a steep financial hit from the coronavirus, after Congress prohibited cost sharing for COVID-19 testing through legislation and as House Democrats pushed a bill to ban copays for treatments.
But the outlook changed once earnings reports rolled in, showing that the decline in medical services far outweighed the cost of treating those with COVID-19. The top five insurance companies raked in $168.3 billion in total revenues for the second quarter.
The drop in use of services was “extraordinary,” said Trevis Parson, chief actuary of health and benefits for Willis Towers Watson.
Medical care dropped 21 percent between March and July, according to a study he co-authored on the large employer market.
Parson had been expecting an increase in costs from the pandemic but quickly realized that health care usage would not rebound that sharply before the end of the year. The trend may lead to the first drop in annual health care spending on record.
“We realized that pretty early on in the second quarter because we were monitoring experience and it was falling off the cliff,” he told CQ Roll Call.
In spite of the upcoming uncertainty in 2021, large employers and insurance companies might still benefit from this year’s decline. The study projects that even with costs increasing next year, total expenses would still be down as much as 3.8 percent when accounting for 2020 cost decreases.
Insurers have taken a back seat to other sectors of the industry seeking pandemic-related aid as a result, even though Democrats are advocating for more federal assistance. Lobbying giants like America’s Health Insurance Plans and the Blue Cross Blue Shield Association of America have framed their requests as aid to their enrollees, not the companies themselves, but talks with Congress still sputtered as COVID-19 negotiations stalled over the summer. Trump has sent mixed messages this week about whether he wants to pursue a relief package.
The Democrats’ most recent bill would increase the federal matching rate for Medicaid while expanding subsidies and granting unemployed workers a special enrollment period on the health care law’s exchanges.
The provisions address the industry’s requests, with the exception of a measure to fully subsidize employer insurance known as COBRA for those who lose or leave their jobs. Democrats included the measure in an earlier bill, but it was dropped from the updated legislation as Pelosi sought to strike a deal with Republicans.
The rosy outlook for insurers this year also likely undercut the industry’s leverage, but long-term concerns might boost their argument for aid later.
Many health plans are making wide-ranging concessions to consumers, which could also bolster their cause. A number of insurance companies, like CareFirst, declined to even factor in COVID-19 projections in their 2021 premium requests on the exchanges while doling out premium credits to customers, extending grace periods for nonpayment and boosting telehealth access.
“We came to the conclusion that you don’t want to flood the market with a bunch of people who don’t have access to health care in the midst of a pandemic,” Pieninck said. “We had no idea at the time exactly what the bottom was going to look like in terms of economic pressures to CareFirst or what potential costs in utilization were going to be for the remainder of the year. What we knew was that we were in a comparatively better place financially than a whole lot of our customers.”
Some companies are beginning to roll back those concessions, but CareFirst and others have extended them until the end of the year, with an eye on continuing some form of consumer aid into 2021.
“Some insurers think the pandemic will have a downward effect on their costs next year, while others think it will increase their costs,” said Cynthia Cox, vice president at the Kaiser Family Foundation. “If there is pent-up demand for forgone health services and widespread uptake of a vaccine, especially if the vaccine requires multiple doses, that could drive up costs.”
Extending financial aid to businesses would also help maintain access to health insurance. The Alliance to Fight for Health Care, an industry coalition, estimates that 7.5 million people lost their commercial insurance in April and May alone, including many who were expected to shift to Medicaid. The Centers for Medicare and Medicaid Services reported last week that Medicaid enrollment increased sharply once the pandemic began, with more than 4 million Americans signing up between February and June.
“States are getting crushed, so we know this is going to be an engagement strategy of how do we go forward together,” Craig Kennedy, president and CEO of Medicaid Health Plans of America, told CQ Roll Call.
The lame-duck session offers another opportunity if Democrats and the White House do not reach consensus on federal aid to the industry before the election. With tens of millions of Americans out of work, the urgency could still drive both sides to an overall deal.