COVID-19's Impact on ACA Insurance Premiums

The COVID-19 global pandemic has changed how we do everything, from how we learn, how we work, how we socialize, and beyond. But, did you know that the coronavirus is also impacting Affordable Care Act (ACA) insurance premiums?

COVID-19 is creating a considerable amount of uncertainty when it comes to what health costs, utilization, and enrollment will look like in 2021.

At first, some observers worried that the pandemic would overwhelm the nation’s health care system and that the surge in costs to insurers from COVID-19 like testing, treatment, and patients’ long-term recovery would cause premiums to skyrocket. Fortunately, it does not look like that will happen (for 2021, at least).

What is the Affordable Care Act?

The Affordable Care Act, also called Obamacare, or ACA, is the name for the comprehensive health care reform law and its amendments. The law addresses health insurance coverage, health care costs, and preventive care. The goal of ACA, according to www.healthcare.gov is to make affordable health insurance available to more people. The law gives consumers subsidies (“premium tax credits”) that lower costs for households with incomes between 100% and 400% of the federal poverty level. 

Individuals and families who do not get healthcare coverage via an employer or a public program, like Medicare or Medicaid, can get coverage in the non-group or individual market. The ACA marketplaces offer a platform where people looking for non-group market coverage can “shop” for comprehensive coverage that best fits their needs.

Given the colossal job losses caused by the pandemic-driven economic recession, the ACA plays a crucial role in helping Americans keep their insurance amid the ongoing public health crisis.

Rising ACA premiums

In 2021, ACA premiums will rise across the board by an average of about 1.1 percent. But, insurers still don’t know the full extent of how the COVID-19 pandemic will affect them. A 1.1 percent increase doesn’t sound too bad. But, for the millions of American families who are also taking a hit in the wallet from the global pandemic, every increase hurts. A recent survey from the Pew Research Center found that half of all adults who say they lost a job due to COVID-19 are still unemployed. What’s more, while the average increase will be around one percent, some insurers will increase premiums by as much as 25.6 percent. 

A report by the Kaiser Family Foundation found that proposed rate changes range from a -42.0% decrease to a 25.6% increase. However, half fall between a 3.5% decrease and a 4.6% increase.

The research found that 118 out of the 273 rate filings it studied (43%) specified the impact of COVID-19 on their rates for 2021. Among the insurers that acknowledged the impact, rates they offered range from a 3.4% decrease to an 8.4% increase.  

Among the insurers implementing large increases for ACA premiums are:

• Oscar Health attributes 7.4 percent of its requested 19.1 percent rate increase in New York to COVID-19. The insurer’s forecast for next year assumes a 13 percent net increase in enrollment, “pent-up demand” from healthcare services that people deferred due to COVID-19, and introducing a COVID-19 vaccine during the 2021 plan year that they forecast will be given to 90 percent of its members, as well as antibody testing for all Oscar Health members.

• Meridian Health Plan of Michigan's initial request was to increase rates by 8.5 percent to “reflect the impact of the COVID-19 pandemic and associated secondary effects.” The group’s actual premium increase will be 2.7 percent.

• Neighborhood Health Plan of Rhode Island increased its premiums by 2.5 percent “to reflect the 

   of the COVID-19 pandemic, reflecting items such as the level of delivered services, population mix, and extra costs due to the pandemic.”

• Denver Health Medical Plan of Colorado explained COVID-19's impact on ACA premiums as, “A number of emergency regulations have been introduced in 2020 related to COVID-19…these have all been considered in the development of the 2021 rates and incorporated in the projected impact of COVID-19 of 6.4 percent.” Nevertheless, the insurer will actually reduce its average premiums by 4.4 percent.

How COVID-19 impacts insurance 

In March, the pandemic’s onset caused sharp decreases in healthcare use. Although many hospitals are overwhelmed by the COVID-19 pandemic as it continues to rage nationwide, insurers have shelled out billions of dollars less in medical claims since the COVID-19 outbreak began. This is because patients postponed expensive elective surgeries in many places, and patients feared going to the doctor’s office for fear of infection.

 After the initial shock that COVID-19 was in America and the initial lockdowns in early 2020, patient volumes rebounded somewhat in May and June. Still, there are lingering questions among insurers about whether a wave of deferred care will crash next year.

Another potential issue is whether there could be increased morbidity caused by deferred care and changes in health insurance status due to layoffs and job changes. For example, insurer Fidelis expects an 8.4% increase in its 2021 New York exchange plan rates because of the pandemic. But the plan Maine Community Health Options projects a 1.2 percent decrease in its rates due to the pandemic, partially because of a projected 1.5 percent reduction in total claims in 2021.

Insurers also expect healthcare use to be lower in 2021 as people continue to practice social distancing and avoid routine care, especially in the absence of a vaccine or in the event of future waves and increased cases of the virus.

The most common factors that insurers cited for driving up healthcare costs in 2021 were:

• The continued cost of COVID-19 testing

• The potential for widespread vaccination

•  Rebounding medical services that were delayed in 2020

• Morbidity from deferred or foregone care

Read more about how COVID-19 is Changing Health Insurance.

Pent-up demand and morbidity adjustments

 As we mentioned, many insurers expect that health c costs will increase in 2021 for several reasons, including increased deaths as a result of deferred care and the impact of that deferred care on chronic conditions, as well as the effects of the economic downturn on people’s health and insurance status.

As we mentioned, Fidelis New York is increasing its premiums by 8.4 percent, something they say is directly related to COVID-19. Here’s how they explained the increase: 

“Premium rates have been adjusted 8.4 percent to reflect the estimated impact of the COVID-19 pandemic and secondary effects on the cost to provide healthcare coverage in 2021. The morbidity change reflects the expected combined impact of COVID-19-related cost drivers on healthcare utilization and intensity in 2021, including:

1. The direct cost of acute COVID-19 treatment, testing, and vaccination.

2. Pent-up demand following social distancing “lockdown” measures

3. Morbidity impact of economic disruption in the form of job terminations, leading to enrollment shifts from employer-sponsored coverage to individual ACA and from individual ACA to Medicaid or uninsured

4. Morbidity impact of lasting population health changes precipitated by the pandemic, including healthcare complications following recovery from severe cases of COVID-19, and worsened health outcomes due to deferred or avoided preventive care and maintenance care for chronic conditions during social distancing lockdown periods”

Vaccination costs

Another reason that insurers are increasing premiums is they expect a vaccine. For example, MVP Health Care in Vermont loaded an additional 1.0 percent to premiums as they prepare for a scenario where they would cover one dose of a COVID-19 vaccination (priced at $75) for 80 percent of their enrollees. They also loaded another 0.3% for deferred services.

Here’s how they reasoned their increase: 

“MVP is assuming that a vaccine to prevent the novel coronavirus (COVID-19) will be tested and widely available in 2021. To account for the costs an immunization would add to claim cost, MVP assumes that immunization would be covered in full at the cost of $75 per dose. MVP is also assuming that 80% of the population would obtain the vaccine (based on an analysis by Wakely Consulting), which corresponds to a PMPM claim cost of $5.00 PMPM. This factor is increasing the experience period allowed claim cost by 1.0%.”

Lower premiums

Due to the COVID-19 emergency, some insurance companies (with prior approval from the Marketplace and their state) are lowering health plan premiums for a month or more in 2020 (called a “temporary premium reduction”). They can do this as long as it’s a fixed percentage off the total premium (like 15%) and is given to all members, regardless of plan type or eligibility for advance payment of the premium tax credit (APTC).

In more rare cases, a few insurers are expecting to decrease premiums due to COVID-19. Maine Community Health Options, for example, is lowering its premium costs by 1.2 percent. 

No impact on premiums

At least 53 insurers included a COVID-19 impact of 0 percent on their premiums because they did not have enough information to alter their premiums confidently. Eleven percent of filings did not mention COVID-19 at all in their rate filings.

For a breakdown of exactly how COVID-19 is impacting ACA premiums in your state and other changes to insurance in 2020, click here. (Link to state-by-state insurance guide). If you are in need of a new insurance policy because of a COVID-19 related income or job change, or any other reason, click here.