Prediction Comes True

Prediction that COVID Has “Small Impact” in Health Insurance Carriers Becomes Reality

ARTICLE EXCEPTS:

Perhaps, the more important part of the story is the implicit reference to “profit.” Remember that at least insofar as fully-insured carrier business is concerned, the ACA did not put a limit on company profits. Profits are dollars, not percentages. It put a limit on what a company could take for expenses and profits as a percentage of premium, but all that did was set up a system guaranteed to increase the underlying cost of claims. Why? Because the only way to generate higher profit “dollars” is to increase the claim component of the premium you can charge so your limited percentage portion will create an increase in the number of such dollars. And so one needs the claim “losses” to increase in order to grow profit.

(THIS IS WHY HOSPITAL CHARGE-MASTER RATES ARE INCREASING AS FAST AS THEY ARE WITH ENCOURAGEMENT FROM THE CARRIERS. ITS MORE PROFITS FOR BOTH. PLAN SPONSORS SEEKING DIRECT AGREEMENTS SHOULD NOT ENTER INTO CHARGED BASED CONTRACTS. THATS AGREEING TO A DISCOUNT OFF AN EVER INCREASING NUMBER)

I predict the “disruptors” will at some point largely be absorbed into the existing quicksand of vested interests that do NOT want the overall total of healthcare spend to decrease.

(WE ARE SEEING THAT NOW. LEGACY RBP VENDORS ARE HEADED BACK TO STATUS QUO “SOLUTIONS” THROUGH PE OWNERSHIP).

What about “transparency” you ask? Won’t that force prices down? Oh, come on, we’ve had that discussion.

PLAN MEMBERS DONT CARE BECAUSE THEIR INSURANCE OUT-OF-POCKET IS THE SAME NO MATTER WHERE THEY GO

Why haven’t we figured out how to stop doing it? Because too many people make too much money supplying those negative economic goods

Prediction that COVID Has “Small Impact” in Health Insurance Carriers Becomes Reality

MyHealthGuide Source: Hobson D. Carroll, FSA, MAAA, President, MedRisk Actuarial Services, Inc.,  11/8/2021

Editor’s Note:  On 3/27/2020, this Newsletter published a prediction (and copied below) by Hobson Carroll that COVID would have a “small impact” on health insurance carriers at a time when other experts felt COVID would significantly impact health insurance negatively.  Recent earnings reports show that COVID has not hurt health insurance carriers … in fact, profits have increased or maintained.

Last week, Axios reported, Insurers still aren’t worried about COVID.

  • Most of the big health insurers have sidestepped massive coronavirus-related costs so far this year, due in large part to people putting off other care, Bob reports.
  • UnitedHealth: Medical claims came in lower than expected, and the company believes the worst of COVID may be over.
  • Anthem: Similar to UnitedHealth, Anthem’s MLR was lower than predicted. Higher COVID costs during August’s surge were more than offset by people deferring other types of care.
  • CVS Health: Medical expenses were higher than expected, but CVS expects its Aetna plans will bounce back in 2022 with fewer COVID costs, and with profitability expected to remain high.

This story serves as reinforcement that Covid hasn’t really impacted commercial insurance carriers, and by extension the self-insured employer plan world. Obviously, there are individual employer exceptions that prove the rule (the rare million-dollar Covid claim that gets covered by an employer plan for a spouse who is elderly, for example), but for the most part..

Perhaps, the more important part of the story is the implicit reference to “profit.” Remember that at least insofar as fully-insured carrier business is concerned, the ACA did not put a limit on company profits. Profits are dollars, not percentages. It put a limit on what a company could take for expenses and profits as a percentage of premium, but all that did was set up a system guaranteed to increase the underlying cost of claims. Why? Because the only way to generate higher profit “dollars” is to increase the claim component of the premium you can charge so your limited percentage portion will create an increase in the number of such dollars. And so one needs the claim “losses” to increase in order to grow profit.

Venture Capital Still Attracted to Healthcare

Notice the massive amount of venture capital and other money pouring into the healthcare sector, meaning anything to do with digital/innovative provision of services, underwriting insurance, insurance allowed-amount constructions (scheduled benefit, RBP, premium surcharges to avoid out-of-pocket-maximum constraints), etc. I predict the “disruptors” will at some point largely be absorbed into the existing quicksand of vested interests that do NOT want the overall total of healthcare spend to decrease. Sure, give people more services (telehealth, DPC, mental health benefit access at parity, diagnosis management, etc.) and that may in fact improve their lives, but it is unlikely to decrease the steady trend upwards in the total healthcare dollar spend of the economy.

Where is Transparency?

What about “transparency” you ask? Won’t that force prices down? Oh, come on, we’ve had that discussion. Until “we” wake up and bring rationality (i.e., such as all-payer consistency and non-discrimination) into pricing along with transparency, the migration will be to something like what the commercial networks pay now on some overall average basis (yes, there are distinct differences between networks at the same provider NOW, but that will change – why? well, TRANSPARENCY, of course!).

So, we will limp along with healthcare taking a larger and larger percentage of GDP, and the best we can hope for is that at least we will be getting something “better” for all that spending. It is so ironic that we can spend so much money on things that are negative economic goods – nobody WANTS to have to spend money on healthcare/sickness, so why haven’t we figured out how to stop doing it? Because too many people make too much money supplying those negative economic goods (and the means to finance them) – the addiction continues, where in this case the addiction arises from the supply side.

About the Author

Hobson D. Carroll, FSA, MAAA is President / Consulting Actuary or MedRisk Actuarial Services, Inc.  Mr. Carroll can be reached at (281) 368 7878 ext. 123 andhdc@medriskactuarial.com.

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.

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