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Straddling the Pandemic ‘Tightrope’ into the Future

All of us, I am confident, would like to know when we will eventually return to some type of ‘normalcy’ in our personal and professional lives – and inject more stability and certainty into our local and national economies. Whatever this new ‘normalcy’ will eventually look like, and when it will happen, remains to play out for various reasons.

Growing evidence suggests that our eventual ‘new normal’ will be different from the environment we had prior to the onslaught of COVID-19, just over a month ago. As the weeks accumulate, over 90 percent of Americans are staying home to work and practice social-distance living. Trying to jump-start ailing local and national economies while keeping the population safe from this contagious virus is akin to walking a tightrope over the Grand Canyon. As a country, this is the ‘balance’ we hope to obtain.

Some good news for Americans – the Grand Canyon tightrope was indeed completed in 2013 by Nik Wallenda.

Through the dedication of those researching a vaccine to treat COVID-19 and the brave medical workers serving our communities, our country will inch our way through this pandemic tightrope – but it will take precious time and patience.

One mathematical modeling study recently released by Harvard University’s T.H. Chan School of Public Health, predicting various scenarios for the pandemic, suggests that intermittent periods of social distancing in the U.S. may be required into 2022. Yes, 2022!  A number of factors will determine the path the virus will take in the coming years – such as, if transmission subsides this summer and resurges in the winter, and if some immunity is induced by infection and how long it will last. Taking delicate steps to avert a surge of severely-sickened people from overwhelming the U.S. healthcare system is paramount.

When implementing national policy and procedures, researchers from this particular study are not advocating any single course of action over another, but their modeling suggests it will require a number of actions to fight this virus into the future. As mentioned by the researchers, “Intermittent distancing may be required into 2022 unless critical care capacity is increased substantially or a treatment or vaccine becomes available.” The researchers acknowledge that ongoing intermittent social distancing will have profound consequences on economic, social and educational outcomes.

The overall conclusion of this research? It is unlikely that life (as we once knew it) will return any time soon. An article that explains this study in greater detail can be found in Stat Reports. This modeling research is expected to be useful to public officials and disease experts when planning for the continued response to the COVID-19 virus.

Please understand, there will be competing projection models that will suggest more rosy prognostications while others will suggest more dire projections toward reaching a new level of ‘normalcy.’ Although performed by a prestigious institution, the Harvard modeling effort will likely be updated as more is learned about the impact of the virus in the weeks and months to follow.

Iowans and Americans will need to confront the brutal facts of what the long-term COVID-19 implications are in the next chapter of this worldwide pandemic. We must learn to adapt by having realistic expectations of living a ‘new normal’ life.

Despite having no practice, this tightrope performance will require stamina, courage, and a great deal of patience.

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COVID-19: What Will Happen to Future Private Health Insurance Premiums?

As of April 6, COVID-19 cases have surpassed 1.35 million globally, with more than 75,000 fatalities…and counting. The U.S. accounted for 367,000 infections and almost 11,000 deaths. The world economy is spiraling disastrously downward with no clear consensus when the bottom will be reached.

While watching the evening news recently, my wife asked me how insurance companies will remain financially sound if the scenarios of COVID-19 cases and fatalities reach doomsday projections. This is a logical, yet difficult, question worth some exploration.

In the U.S., most healthcare is privately provided – except for the elderly (Medicare) and for the poor (Medicaid). The key issue in the U.S. and most countries is to enable rapid testing of people in vulnerable populations, such as the elderly and individuals with health conditions who may have compromised immune systems.

Overview on Treatment Cost, etc.

Most countries, thanks to government-directed health systems, will provide free testing and treatment, but in the U.S., when appropriate tests are available, it is largely dependent on whether each private insurer (and self-insured employers) will cover COVID-19 testing and treatment. However, the Families First Coronavirus Response Act that was recently passed by Congress mandates that Medicare, Medicaid, other government plans, and most private plans cover the entire COVID-19 testing.  It must be noted that ‘surprise’ billing issues could develop under some scenarios.  There are no curative treatments for the COVID-19 virus itself, so the treatment mentioned in this blog addresses the complications from COVID-19-related illnesses.

According to the Peterson-Kaiser Family Foundation Health System Tracker, the potential costs of COVID-19 treatment for Americans covered by employer health plans will vary greatly by location and insurance plans – in addition to complications and comorbidities. The average hospital stay for admissions due to pneumonia, a relatively similar comparison to treating COVID-19, with or without complications or comorbidities is 3.2 days – with a median total cost of treatment being about $13,000. Patients with respiratory conditions who require a ventilator (requiring less than 96 hours) will average 5.8 days – with a median cost of over $34,223. Finally, patients on ventilators for more than 96 hours will average 22.6 days – with a total median cost of over $88,000.

It is important to note that the actual number of patients and the medical efforts required will ultimately determine the true medical costs, both in Iowa and across the country. Medical costs in Iowa tend to dip below national average costs mentioned earlier.

As of April 5, a research center at the University of Washington estimated that 420 Iowans will die of COVID-19 by August 4. This figure is based on a moving target of assumptions, as it will be greatly dependent on a number of variables such as stay-at-home adherence by Iowans practicing social distancing, number of Iowans affected by the virus, healthcare workforce capacity and availability of medical supplies, adequate number of ventilators, etc. Just three days earlier (April 2), this Iowa estimate was 1,488 fatalities. Facts and assumptions are clearly very fluid at this time. The number of Iowa residents testing positive in the upcoming weeks is expected to peak in late April or early May. The Iowa Department of Public Health provides the latest update on the COVID-19 cases, including the number of Iowans currently hospitalized, discharged and recovering, never hospitalized and deceased.

The majority of people with COVID-19 can be managed at home, but as the cases in China have demonstrated, about 15 percent required hospitalization and another five percent ended up in critical care.

Postponed Medical Visits and Elective Surgeries

Hoping to free up more hospital beds and staff to deal with the COVID-19 surge of patients, many Iowa and U.S. hospitals have postponed elective surgeries and procedures. It is important to note that these ‘elective’ procedures cover many different areas, and in some cases, are still considered urgent, such as cancer, organ transplants and heart conditions, while other procedures, like joint replacements, are not considered to be a medical ‘priority.’ Elective surgery is any surgery that is scheduled.

Certain types of elective surgeries may be postponed for a long time – such as hip and knee replacements – but sometime later this year, or in 2021, there will be a pent-up demand for those types of surgeries. In fact, some procedures could develop into more serious medical conditions, including compromised mental well-being of having prolonged pain and discomfort.

Insurance Companies – Wellmark Blue Cross and Blue Shield of Iowa

On March 20, Wellmark Blue Cross and Blue Shield of Iowa, the state’s largest private insurance company, indicated that it is offering virtual healthcare visits for all appropriate medical and behavioral health visits at no cost to members until June 16. Additionally, Wellmark is covering diagnostic testing for COVID-19 at no cost-share to members. Early refills of prescription drugs are also permitted.

Wellmark then announced on April 1 they will retroactively waive members’ cost-share related to the treatment of COVID-19 – including copays, coinsurance and deductibles – when members seek care from an in-network provider, effective February 4 through at least June 16. By eliminating cost barriers to their fully-insured business and Medicare Supplement members, the desire is to ensure members seek the necessary testing and care regarding COVID-19. Self-funded employers that are administered through Wellmark will decide separately whether to replicate Wellmark’s policy or implement something different.

What Will COVID-19 Mean to Future Private Premium Costs?

How the COVID-19 medical costs will impact private Iowa medical insurance premiums is unknown at this time. Insurance companies, such as Wellmark, establish a ‘reserve’ for claims that are incurred but not yet paid. Additionally, certain statutory requirements for reserves are set aside to help cover unique medical situations that we are currently experiencing. If the COVID-19 claims erode the reserves, insurers may actually have a legal obligation to increase rates to build up those reserves for the next ‘emergency’ sometime later. This is a sound actuarial practice.

Insurers may need to price their 2021 premium rates upward to anticipate a surge in elective surgeries because people have delayed less urgent medical services. On the other hand, the decrease of elective procedures this year may help insurers financially weather the COVID-19 medical costs; their reserves may hopefully be stronger than expected when heading into 2021. A new report from Covered California, the Affordable Care Act marketplace in that state, projects that commercial carriers and employers could face between a $34 billion to $251 billion bill for COVID-19 testing and treatment in 2020, requiring insurers to increase premiums between four percent to 40 percent. Whether the federal government would help mitigate premium growth due to this pandemic is too soon to speculate.

All of this will largely depend on controlling the pandemic as soon as possible. If insurers have to dig deep into their capital reserves, then all bets are off on just how much higher health insurance premiums will need to be in 2021.

As one insurance professional mentioned to me last week, “Reserve adequacy is a function of rate adequacy.” In other words, rates will need to be adjusted upward to ensure the claims and reserves are adequate for future emergencies.

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DOL Releases FFCRA Regulations on April 1

On April 1, the U.S. Department of Labor (DOL) issued temporary regulations for the Families First Coronavirus Response Act (FFCRA), providing confirmation that employees must give notice to their employers of the need to take leave and provide documentation to support paid sick leave and emergency family and medical leave. This rule is effective from April 1, 2020, through December 31, 2020. Initial background discussion about FFCRA was found in our March 25 blog.

In addition, the Internal Revenue Service provides guidance on needed documentation for FFCRA.

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