Health Plans

Diversified Insurers May Have Advantage Amid COVID-19 Pandemic

March 31, 2020

As the COVID-19 crisis continues to ramp up in the United States, projections about how it will affect various business sectors — including managed care — are evolving rapidly. But one concept that industry analysts seem to agree on is that health insurers with diversified business models may be better equipped to weather the storm.

To Peter Manoogian, principal at the health care consultancy ZS Associates, a main reason for the value of diversification comes from simple math. During the last financial crisis in the mid-2000s, about 5 million people shifted out of the employer-sponsored plan market when they lost their jobs, says Manoogian.

By Leslie Small

As the COVID-19 crisis continues to ramp up in the United States, projections about how it will affect various business sectors — including managed care — are evolving rapidly. But one concept that industry analysts seem to agree on is that health insurers with diversified business models may be better equipped to weather the storm.

To Peter Manoogian, principal at the health care consultancy ZS Associates, a main reason for the value of diversification comes from simple math. During the last financial crisis in the mid-2000s, about 5 million people shifted out of the employer-sponsored plan market when they lost their jobs, says Manoogian. Now, all signs point to the fact that the coming economic crisis will be even worse, so odds are that considerably more than 5 million people will move from the employer-plan market to the Affordable Care Act exchanges or Medicaid.

“So if I’m a health plan and I’m thinking about my business strategy, it would certainly behoove me now more than ever to be really diversified in the lines of business that I offer,” Manoogian says.

Ralph Giacobbe, a health care sector analyst for Citi Research, remarked during a March 24 webinar about COVID-19 that managed care companies look quite different than they did during the last economic crisis.

“I think we also have to recognize [that there are] much more diversified business models from where we were even just five, seven, 10 years ago for a lot of these companies — that helps dampen some of the impact from potentially higher unemployment rates,” he said.

“Netting it all out, we essentially see [the COVID-19 crisis as] neutral for the sector — perhaps aside from Humana, which does have a little bit more of a disproportionate exposure to the elderly population given its MA [Medicare Advantage] business mix,” Giacobbe said.

Although health insurers might see challenges in the coming months, both S&P Global Ratings and A.M. Best said in recent reports that their outlook for the sector remains “stable.”

Datapoint: Pandemic May Cause Large Premium Surges

March 26, 2020

A new analysis from Covered California warned that the costs associated with the coronavirus pandemic could cause premium rates to rise dramatically, as much as 40% for some plans, in 2021. The state-based exchange said the outbreak could particularly hurt exchange plans, which currently cover 10,919,681 lives, as premium surges may cause many unsubsidized enrollees to drop coverage altogether.

A new analysis from Covered California warned that the costs associated with the coronavirus pandemic could cause premium rates to rise dramatically, as much as 40% for some plans, in 2021. The state-based exchange said the outbreak could particularly hurt exchange plans, which currently cover 10,919,681 lives, as premium surges may cause many unsubsidized enrollees to drop coverage altogether.

Source: AIS’s Directory of Health Plans

Experts Weigh in on UnitedHealth’s New Closed-Network Product

March 26, 2020

UnitedHealthcare is testing a new product in southern California using a closed network that relies on the company’s own OptumCare medical group. “Harmony” plans, which the insurer first rolled out in mid-2019, boast premiums that are significantly lower than other plans from UnitedHealth and from competing insurers.

“This is a ‘back to the future’ development,” says Jon Kingsdale, senior strategy adviser at Wakely Consulting. “With Optum’s acquisition of [medical] groups and customers’ increasing sensitivity to costs, United is re-inventing closed network products.”

By Jane Anderson

UnitedHealthcare is testing a new product in southern California using a closed network that relies on the company’s own OptumCare medical group. “Harmony” plans, which the insurer first rolled out in mid-2019, boast premiums that are significantly lower than other plans from UnitedHealth and from competing insurers.

“This is a ‘back to the future’ development,” says Jon Kingsdale, senior strategy adviser at Wakely Consulting. “With Optum’s acquisition of [medical] groups and customers’ increasing sensitivity to costs, United is re-inventing closed network products.”

A total of 35,000 people have signed up for Harmony in southern California, and UnitedHealth is paying agents sales bonuses of $100 for each member who enrolls, compared to $50 or $25 for most other plans, Bloomberg reports.

“I like the approach — a lot,” says Joe Paduda, principal of Health Strategy Associates, LLC. “The price differential should be compelling. One hopes it comes with much lower hassle factors as well in the form of streamlined benefits, copay and deductible management, formulary integration and integrated EHRs [electronic health records].”

In order for insurers to succeed, Paduda tells AIS Health, they need to demonstrate the ability to “deliver excellent outcomes at lower cost. The only way to do that is by owning or having very tight relationships with the clinicians and providers delivering care.” UnitedHealth’s Harmony effort, he adds, “is a promising step.”

But Kingsdale says United/Optum’s ultimate success in its Harmony venture will depend on whether the company can deliver comparable benefits at a far lower cost. “Is Optum really able to make these groups 20% more efficient?” he asks. “If so, it ought to be enough to move customers, but the real question is, can Optum’s delivery system sustain that 20% discount? Only time will tell.”

Chris Sloan, associate principal at Avalere, says that other insurers are moving in this direction. “It’s getting easier for the smaller groups and health systems to start their own health plans. I think we’re going to see a lot more health systems doing this,” he tells AIS Health.

Datapoint: Blue Shield of California Launches COVID-19 Triage Tool

March 25, 2020

Blue Shield of California last week said its in-network hospitals will have access to a new free tool, the “COVID-19 Screener and Emergency Response Assistant.” The digital tool, which asks patients basic questions about their current health status, will help hospitals triage potential coronavirus cases. Blue Shield of California currently serves 3,304,237 lives, with 74.3% enrolled in commercial risk-based products.

Blue Shield of California last week said its in-network hospitals will have access to a new free tool, the “COVID-19 Screener and Emergency Response Assistant.” The digital tool, which asks patients basic questions about their current health status, will help hospitals triage potential coronavirus cases. Blue Shield of California currently serves 3,304,237 lives, with 74.3% enrolled in commercial risk-based products.

Source: AIS’s Directory of Health Plans

ACA Plans and Medicaid May See Enrollment Growth Amid COVID-19 Pandemic

March 25, 2020

The COVID-19 pandemic is shaping up to be a stress-test for the post-Affordable Care Act insurance market. The crisis has already caused mass layoffs, and experts say the individual health insurance exchanges and Medicaid could see record enrollment in the coming months as a result.

“This would be the first recession since the Affordable Care Act went into effect, so we are in somewhat uncharted territory in terms of what might happen in a recession under both the ACA marketplace and the Medicaid expansion,” Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, said during a March 18 conference call with reporters.

by Peter Johnson

The COVID-19 pandemic is shaping up to be a stress-test for the post-Affordable Care Act insurance market. The crisis has already caused mass layoffs, and experts say the individual health insurance exchanges and Medicaid could see record enrollment in the coming months as a result.

“This would be the first recession since the Affordable Care Act went into effect, so we are in somewhat uncharted territory in terms of what might happen in a recession under both the ACA marketplace and the Medicaid expansion,” Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, said during a March 18 conference call with reporters.

Levitt said the ACA marketplace is likely to see rapid growth in enrollment as workers lose jobs or hours, making them eligible for special enrollment periods in some cases.

“Household income is going to tend to fall, and that will put more people into that lowest income category with the broadest enrollment in the ACA marketplace,” Levitt said. That influx of enrollees, he added, “has the potential to improve the risk pool in the ACA marketplace and shouldn’t, by itself, have a big effect on premiums.”

Meanwhile, “as people lose their jobs and their incomes fall below 138% of poverty in those states that have expanded Medicaid, we’re likely to see growth in Medicaid enrollment — as we typically do during recessions,” Levitt said.

“Medicaid traditionally has been countercyclical….It’s an economic balancer,” says David Anderson, a health policy researcher at Duke University’s Margolis Center for Health Policy. “In 2009 [during the last economic recession], the federal government raised the federal payment rate — the federal share of Medicaid — by 6.2 points. What that did is it gave states breathing room in their budget…That extra federal share takes a little bit of pressure off the rest of the state budget.”

To that end, President Donald Trump on March 18 signed the Families First Coronavirus Response Act, which, among a host of other provisions, temporarily increased the Medicaid federal medical assistance percentage by 6.2 points.

Questions Remain About Cost Impact of Coronavirus Treatment

March 24, 2020

Though many health insurers have removed cost barriers related to testing patients for the new coronavirus that’s sweeping the globe, they largely haven’t pledged to waive out-of-pocket costs for severely sickened members who require hospitalization. A new analysis suggests that the cost of caring for those patients could be steep for members and health plans alike, but experts tell AIS Health it may be too early to say what that will actually mean for commercial insurance markets.

By Leslie Small

Though many health insurers have removed cost barriers related to testing patients for the new coronavirus that’s sweeping the globe, they largely haven’t pledged to waive out-of-pocket costs for severely sickened members who require hospitalization. A new analysis suggests that the cost of caring for those patients could be steep for members and health plans alike, but experts tell AIS Health it may be too early to say what that will actually mean for commercial insurance markets.

According to the analysis, from the Peterson Center on Healthcare and the Kaiser Family Foundation (KFF), the average total cost — combining employer-plan spending and patient out-of-pocket costs — for a pneumonia-related hospital stay “with major complications and comorbidities” was $20,292 in 2018. For a stay “with complications or comorbidities,” the average cost was $13,767, and for patients without complications, the price tag was $9,763. Looking at out-of-pocket costs alone, the average cost for patients with major complications or comorbidities was $1,300.

But those estimates can only tell us so much about the financial impact of the pandemic, KFF Executive Vice President for Health Policy Larry Levitt said during a March 18 web briefing with reporters.

“We have some information about what the cost for each patient will be, but we have very little information yet about how many patients there may be,” Levitt said in response to a question from AIS Health. “And that’s the big area of uncertainty — how widespread the infection will be and how many people will become severely ill and require hospitalization. So insurers at this point are running blind on how much the total cost may be.”

Generally, regulators do not permit health insurers to recoup prior-year losses through premium increases, “so insurers are going to be focusing a lot on what the ongoing cost” of the coronavirus outbreak could be when pricing their products, Levitt said.