The health insurance industry’s rate applications for 2021, posted this month by state officials, reveal deep uncertainty about the long-term impact of the coronavirus pandemic on medical costs.

Some companies anticipate sharply higher claims for COVID-19 testing, treatment and, ultimately, vaccinations. Others foresee lower claims as providers struggle with pandemic-related restrictions and patients postpone procedures and avoid hospitals.


This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the coronavirus pandemic.


These conflicting predictions resulted in starkly varying premium applications, ranging from a 29 percent increase requested by Oscar Health Insurance for its small-group coverage, to a 4 percent reduction proposed by Independent Health Benefits Corp. for individual coverage (see tables below).

The weighted average of the requests was 11.7 percent for non-group coverage and 11.4 percent for small groups of up to 100 employees. Neither figure is especially high compared to requests over the past six years, and DFS typically approves rates that are lower than what companies requested.

Further complicating the picture, most plans can expect to lose a chunk of their paying customers due to the sudden economic downturn and widespread layoffs.

One exception to that rule is Fidelis Care, which primarily contracts with Medicaid and other government-funded safety-net programs, and whose parent company, Centene Corp., is forecasting an enrollment surge.

Under the state’s “prior approval” law, health insurers are required to submit their proposed individual and small-group premiums for the following year in mid-May. The timing meant that plans were obliged to prepare their applications to the Department of Financial Services in the midst of a major infectious disease outbreak that triggered an unprecedented shutdown of much of the economy.

In the short term, the net impact for many plans has been a big drop in claims, as hospitals were obliged to stop elective procedures and many routine office visits were cancelled or postponed. Aetna, for example, reported a 30 percent drop in claims during April. From March to April, Centene reported that non-inpatient claims were down 32 percent, emergency room claims were down 46 percent, and inpatient authorizations were down 15 percent.

Nationwide, insurers are offering premium discounts and expect to owe rebates going forward.

In its application form for 2021 premiums, DFS asked plans to specify how the cost of coronavirus treatment would affect rates. Actuaries for some plans, such as Healthfirst, anticipated no impact at all, assuming that claims would hold steady or remain lower.

Others plans anticipated that pent-up demand for care that was postponed during the pandemic would lead to a rush of claims in the future. Oscar expected coronavirus would add 5.1 percent to its medical costs, and Fidelis put the impact at 11.5 percent.

Oscar’s application gave details for two anticipated costs, for antibody testing and vaccination:

An adjustment was included to account for the anticipated costs associated with the introduction of a vaccination in the 2021 plan year. Oscar assumed a 90% adoption rate across the projected membership distribution and a cost of $100 to administer the vaccination. The estimated impact on an allowed cost basis is 1.5%.

Lastly, an adjustment was included to account for the anticipated costs associated with the introduction of antibody testing. Oscar assumed a 100% adoption rate across the projected membership, an average of 1.5 tests per member, and a cost of $150 to administer each individual test. The estimated impact on an allowed cost basis is 3.8%. 

Beyond coronavirus, health plans had to account for factors such as generally rising medical costs, new state coverage mandates and the impact of “risk adjustment,” a feature of the Affordable Care Act that requires insurers with relatively healthy patients to subsidize insurers with relatively sick patients.

The impact of risk adjustment was particularly severe for Oscar, which said its payments under that program accounted for $361 of its proposed monthly small-group premium of $896. Oxford Health Insurance, which serves more than half of the state’s small-group market, said risk adjustment would reduce its rates by 1.7 percent.

The rate applications cover only a portion of the state’s commercial insurance market. Large-group and self-insured plans are exempt from state regulation.

Experience suggests that this regulatory process is failing to result in significant cost savings for consumers. New York’s employer-sponsored premiums are among the highest in the U.S.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

You may also like

The ARP Opportunity

Some New York local governments  are soliciting input from residents as they decide how to spend  billions in pandemic emergency dollars Read More

The Health Department’s FOIL Responses Signal an Indefinite Wait for Pandemic Data

The quest for comprehensive data on New York's coronavirus pandemic hit a bureaucratic roadblock this week Read More

A Study of COVID-19 in Nursing Homes Raises Doubt About New York’s Minimum Staffing Law

A newly published study of COVID-19 in nursing homes links larger numbers of employees to higher rates of infection and death for residents – raising fresh doubts about New York's recently enacted "safe staffing" law. Read More

Health Research Inc. Turns Over its Payroll Records Despite Claiming To Be Exempt from FOIL

The full payroll records of more than 2,400 de facto state employees are available to the public for the first time after being released by Health Research Inc. Read More

New York’s Medicaid Rolls Kept Pace with a Nationwide Surge During the Pandemic

New York's Medicaid and Child Health Plus programs added three-quarters of a million enrollees during the coronavirus pandemic, roughly matching the pace of a national surge in sign-ups. Read More

New York’s State Share of Medicaid Spending is Due to Jump 22 Percent This Fiscal Year

The state share of Medicaid spending is projected to jump 22 percent under the recently approved state budget, an unusually steep one-year jump for what is already one of New York's biggest expenditures. Read More

New York’s Hospital Industry Ranks Near the Bottom of Two Quality Report Cards

New York's hospitals remain near the bottom of two quality report cards. The state's hospitals received the lowest rate of any state except Nevada and DC. Read More

New York’s ‘Bluest’ Counties Have the Lowest COVID Vaccination Rates for Older Residents

New York's bluest counties are posting the lowest coronavirus vaccination rates for older residents, a striking contrast with the pattern in the U.S. as a whole. The disparity appea Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!