Pandemic in a year: Despite big profits in 2020, health insurers see volatility ahead

Pandemic in a year: Despite big profits in 2020, health insurers see volatility ahead.

Companies could be hit with a double peak of claims from COVID-19 patients and people cared for because of the pandemic. For health insurers, doing actuarial calculations is like driving a car using only the rearview mirror. The analogy was never harder than it was earlier last year, when actuaries read about the first reported cases of COVID-19 and feared an imminent tsunami of the dreaded IBNR - claimed but not reported - claim. .

Since then, actuaries have learned that what they had planned for 2019 had little value as COVID-19 infections spread across the country, employers laid off workers, and governors closed schools and businesses. was closed. While some costs rose due to increased costs to care for insured members infected with the SARS-CoV-2 virus, the closure of other health services eased financial pain for many insurers.

According to a December 2020 report by researchers at the Kaiser Family Foundation, "the pandemic and the resulting economic crisis outweigh any expectations this year may have looked like about health spending, access and insurers' subsequent financial performance."

Many for-profit insurers reported record profits in the second quarter and for the full year of 2020 because their members did not go to the hospital or see their physicians at a normal level. Some of those sky-high profits were cut short in subsequent quarters when increased demand for care pushed insurers' costs. The financial volatility of the pandemic-ravaged year became apparent in early 2021, when the three major health insurers reported their financial performance for the fourth quarter of 2020 and the entire calendar year.

On January 20, UnitedHealth Group, the nation's largest insurer, reported $15.4 billion in its full-year 2020 profits, including a $2.2 billion profit for the fourth quarter, $3.2 billion in the third quarter and $6.6 billion in the second quarter. The Star Tribune in Minneapolis reported that the insurer said benefits were significantly higher than normal due to unprecedented delays in elective and non-emergency procedures.

On February 3, Humana reported a loss of $458 million for the fourth quarter of 2020, a significant drop from the $593 million the company reported in profit for the fourth quarter of 2019. The insurer attributed the loss to a huge jump in hospital admissions for patients. With COVID-19 in almost all its markets.

Although spending for non-COVID-19 care dropped by about 15% from normal levels, Humana said the decline reflected an increase in costs for testing and treating members with COVID-19. not offset. For 2020, however, Humana reported a profit of $4.6 billion, a 40% increase over the company's 2019 profit of $3.5 billion.

On the day Humana reported its financial results, Cigna reported a profit of $4.1 billion in the fourth quarter of 2020, a huge jump from the $977 million in the fourth quarter of 2019. For the full year, Cigna posted a profit of $8.5 billion, a 66% increase from the company's $5.1 billion profit for 2019.

"By all accounts, publicly traded health insurers performed very well last year," said economist Sarah R. Collins, PhD, vice president for health care coverage and access at the Commonwealth Fund. "By that I mean they were quite profitable."

       Mlr trend-

Among insurers, the all-important medical-loss ratio (MLR) fell. Most health plan companies cost more because of members' payments for COVID-19 treatments, but they also cost less because so many Americans delay elective and other non-emergency care. "In general, they had fewer claims than they used to, and this was across all coverage segments: the individual market, the group market, Medicare Advantage (MA) and Medicaid managed care," Collins explains.

The Kaiser Family Foundation's analysis was similar. Using data from the National Association of Insurance Commissioners compiled by Mark Farah Associates, researchers found that average benefit levels at the end of September in the four main insurance markets -- individual, group, MA and Medicaid managed care -- were higher and MLR levels were higher. Lower or flatter than the levels in the third quarter of previous years.  "These findings suggest that many insurers remain profitable despite increases in both COVID-19-related and non-COVID-19 care in the third quarter of 2020," the researchers wrote.

Another view of the health insurance market comes from Fitch Ratings, which analyzes the creditworthiness of companies. Noting that 2020 was a turbulent year for insurers, Fitch pointed out that these companies had strong operating performance in 2020, and Fitch expects that level of performance to continue into 2021. However, the Fitch report said this year could see "advanced volatility". between insurers and from one quarter to the next.

Although MLR declined in the second quarter of 2020 as healthcare access fell, Fitch does not expect MLR levels to decline again this year. "Fitch currently has a stable outlook on nearly all of its ratings in the US health insurance sector," the company said in its 2021 outlook report.

       

            Insure helping out.

This situation is common among large, publicly traded, for-profit insurers. Association for Community Affiliated Plans (ACAP) CEO and Managed Healthcare Executives® editorial advisory board member Margaret A. "You can't really generalize to the entire health insurance market, because every market is unique," says Murray. ,

ACAP represents 78 non-profit health insurers serving more than 20 million low-income members with complex health care needs. Those 20 million members represent more than a third of all Americans in Medicaid managed care plans, according to ACAP.

In August, ACAP reported that its member health plans contributed more than $175 million to support physicians, hospitals and community health centers (CHCs) who needed financial support during the pandemic. With those funds, providers and CHCs paid for personal protective equipment, donated to food banks and food delivery services such as Meals on Wheels, and provided shelter for homeless members who have COVID-19. but was not hospitalized, ACAP reported.

Some of the ACAP insurers insure members in a long-term care setting and others who need care at home. "We provide support for these members so that they can live at home or in nursing homes or other settings," notes Murray. Some of those plans had higher hospitalization rates, and many of their members died of COVID-19, she says.

“Our plans really lost a lot of members to COVID-19, and as a result, they really suffered financially,” says Murray. "But, at the same time, our plans pay a lot more to their physicians. And sometimes to hospitals, and those payments allowed providers to maintain full operations throughout the year."

aCAP members pointed out that capitulated payments made to network physicians and hospitals have supported providers during the pandemic, when lack of access has reduced revenue from fee payments for the service. Furthermore, keeping physicians and hospitals solvent during a pandemic is in the interest of all health plans as it helps the plans retain providers, which helps them retain their insured members as well.

Ceci Connolly, president and CEO of the Alliance of Community Health Plans (ACHP), agreed that one of the lessons learned from the pandemic was the value of capitulated payments. ACHP has 24 non-profit health plans that serve 22 million insured members. ACHP's member plans include powerhouses such as Geisinger Health Plan, Harvard Pilgrim Health Care and Kaiser Permanente.

Early last year, chief executives of ACHP's member plans feared the pandemic would last more than a year and worked with their actuaries to prepare a budget in two years. Connolly says, “It is a smart way for our plans to think about the challenges they will face in their operations and to prepare the financial resources to cover the costs that can come during times of unprecedented levels of uncertainty. Huh."

“The uncertainty is challenging for actuaries because they must accurately forecast risk at a given point in time and then make sure they have the dollars to take care of everyone in their membership,” she adds. [be] good at that because they understand the population and what are... the standard number of heart attacks and babies born and things like that. But the pandemic provided an unexpected level of risk that no one had predicted. ,

More claims to come

Despite COVID-19 vaccines, many health insurance experts are concerned about the cost of care related to COVID-19 infections and a potential surge that could lead to a double peak in costs and claims for services that Americans turn down. 

Using data from a PwC report on trends in medical costs, CNBC reported that if most of the care deferred by health plan members in 2020 is delivered this year, medical costs will drop from pre-pandemic levels. may exceed 10%. This would result in the highest rate of medical-cost inflation since 2007, CNBC said.

CNBC cited the results of a survey by the American Benefits Council to show that even large employers are drawn to hefty bills from deferred care. "Large self-insured employers are concerned that delayed treatment this year will not only lead to a higher number of medical claims in 2021, but also higher costs for more acute care," CNBC said.

The pandemic has ruined predictions. If, as Connolly suggested, actuaries dislike the precariousness, they will loathe this assessment of PwC analysts: COVID-19 has created so much uncertainty that it is difficult to say precisely whether medical- Cost trends will be significantly lower or higher.

Source by internet.

Created by MOHAMMAD SHOAIB.