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Tidal Waves in Insurance 2020

by Sep 21, 2020

Healthcare news September 2020.

Looking at my email I see the usual proliferation of things going on in healthcare and health insurance. However, in looking at the overall trend, a potentially disturbing picture begins to emerge.

Number of uninsured increasing – Following the adoption of the 2010 Affordable Care Act (ACA) the number of uninsured people went down, however the number of nonelderly uninsured people began to increase in 2017.

The pandemic and healthcare coverage – as people lost employment, they also may have lost their healthcare coverage. Where do all those claims go for payment now? As reporting catches up with reality this can be expected to become a bigger news issue.

Employers may drop health coverage plans – “…Harvard Business School finds. Nearly one-third of employers surveyed weren’t sure they could pay premiums beyond August 15, 2020” (HBS faculty members Leemore S. Dafny, Zoë B. Cullen, Christopher T. Stanton, and doctoral student Yin Wei Soon)

Health insurance premium rebates – “Nearly 8 million people may get a piece of $2.7 billion in health insurance rebates this year.”

That last one might cause you to ask where is that $2.7 billion in health insurance rebates coming from if people have dropped their coverage and reduced the premium flow?

First, the MLR ratio is calculated based on a rolling three-year average, in this case 2017, 2018 and 2019. Those were years of rising employment and rising participation in group, and personal, health coverage. That meant increased premium payments and a claim versus premium balance. That all dramatically reversed in 2020.

Next – the full effect from claims related to coronavirus treatment has not yet been seen, and insurance has paid far less than projected because things like elective medical procedures have been delayed.

This all means that insurance companies have been caught holding more cash than the law allows them to, but also knowing there could be a backed up tidal wave of claims just waiting to come ashore.

Insurance is like any other financial issue; income has to exceed expenses. But insurance needs to be forward looking and hold sufficient reserves in the good years to offset for the bad years.