Payers Split on Factoring COVID-19 into 2021 Premium Rates

July 23, 2020 - Over half of the public rate filings from payers on the individual and small group health insurance market are proposing 2021 premium rates changes between a two percent decrease and a six percent increase, according to Kaiser Family Foundation.

The coronavirus pandemic has thrown a wrench into the annual premium filing process, but experts are able to draw some conclusions about payer expectations from the early payer filings that have been made public.

Ten states plus the District of Columbia have made payer filings public. This sampling produced 63 public filings. Premium rate decisions for 2021 are not due until the end of the summer and all of the filings do not have to go public until early fall.

“We reviewed published filings for the overall average premium increase across all plans and any language or estimate attributing a portion of the rate change to the impacts of the coronavirus pandemic,” the researchers explained.

While most of the filings were between a two percent decrease and six percent increase, the full range of possible rate changes was much broader. Based on the current filings, some payers are looking to adjust their rates downward by 12 percent or increase rates as high as 31.8 percent, the brief uncovered.

More than four in ten payers said they did not account for the coronavirus pandemic in their final rate (43 percent).

Payers noted a couple of reasons for this choice.

Payers said that they did not have enough information to make a decision around the pandemic. Some pointed out that the trajectory of the pandemic is unknown. Others suggested that the economic impact is unknown and would influence the market in unforeseeable ways.

On the last point, payers homed in on the possibility of high churn between marketplaces during 2021, a possibility substantiated by a Robert Wood Johnson Foundation analysis of the individual health insurance market in 2020.

“These insurers indicated that they would continue to monitor the pandemic and potentially revise their proposed rates based on their experience and as more data become available,” the Kaiser Family Foundation brief noted.

In contrast to these payers, 37 percent of the filings (23 filings) indicated that they had included pandemic projections in their rates.

These payers expected that there would be an increase in healthcare spending in some areas and a decrease in others. In particular, they highlighted care delivery fluctuations, expanded testing, and a potential second wave of the pandemic. Some went so far as to project that these factors would cancel each other out.

For those who took these factors into account, more than half only adjusted rates by increasing them one to four percent. The full range was 1.2 to 8.4 percent.

When UnitedHealthcare released its second quarter earnings report for 2020, the payer gave more specific insight into more recent developments in care delivery.

“We see the system operating just short of its normal baseline now, far above the lows experienced as the second quarter began,” David Wichmann, chief executive officer of UnitedHealth Group, explained in the earnings report call.

“We currently expect care access patterns – while somewhat more volatile than in the past – to moderately exceed normal baselines in the second half, as people seek previously deferred care.”

UnitedHealthcare of New York and UnitedHealthcare of Oregon were included in the public filings. The former adjusted rates upward one percentage point due to the virus and the latter adjusted upward by 2.5 percent.

Several payers redacted their response on whether COVID-19 would impact rates and others did not mention coronavirus at all.

Payers did not expect to hike premiums in 2021, according to an eHealth survey published in April 2020.

However, the small sample size of current public filings demonstrated that, in practice, payers are split. Twenty-two of the 58 payers who were not new entrants filed for a decrease, though for several the decrease was merely a fraction of a single percentage point.

“Thus far, many rate changes for 2021 appear to be moderate, with increases or decreases of a few percentage points,” the brief stated. “However, because many insurers have not yet incorporated a rate impact from the pandemic, it is too soon to say how Marketplace premiums will change next year.”