COVID-19 still a big uncertainty for insurers in 2021 – Modern Healthcare


Political uncertainty and rising costs related to the COVID-19 pandemic will drive health insurers to set prices conservatively and invest in new business lines this year.

Given the continuation of the pandemic, health insurers are steeling themselves for a possible bumpy ride. Industry analysts said they expect 2021 to be a volatile year for insurers, although nothing can compare to the dramatic peaks and valleys in profits publicly traded companies reported in the first half of 2020.

Moody’s Investors Service forecasts mid- to single-digit earnings growth among insurers in 2021. “The need to control health costs has been a huge problem for the industry and for the country,” said Dean Ungar, vice president and senior credit officer at Moody’s. “The health insurers know that their future in a way depends on helping keep costs under control without government intervention and government meddling. The insurers are investing in things like value-based care and digital, remote monitoring.”

During the first two quarters of 2020, hospitals deferred elective procedures and health plan members put off routine doctor appointments. Those care deferrals are expected to continue at insurance giant UnitedHealth Group, John Rex, chief financial officer at the Minnetonka, Minn.-based health insurer, said at an investors conference in December.

Rex said he expects the deferral of care to continue into 2021, with the spike in COVID-19 cases this winter keeping members out of hospital waiting rooms, although not at the levels seen in 2020. 

He said the missed preventive tests and procedures people delayed would result in more severe illness when they’re diagnosed, plus COVID-19 could also have long-term health effects on patients’ health that may be expensive for insurers.

UnitedHealth expects COVID-19 testing, treatment and other pandemic-related costs to reach $2 billion in 2021, with about 75% of that total coming from its insurance subsidiary UnitedHealthcare’s bottom line.

“Certain populations, particularly seniors, have deferred care,” Rex said. “Some have not seen a doctor at all in 2020, which impacts their health, and our ability to close gaps in care and properly document conditions that surely still exist. This could affect final risk scores in 2021.”

Some insurers expect a lower amount of traditional claims to offset the high costs of COVID-19 treatment. Mary Anne Jones, chief financial officer at Priority Health, said she expects the Grand Rapids, Mich.-based insurer’s finances in 2021 to mirror the third and fourth quarters of the previous years for the company, which is a subsidiary of Spectrum Health.

“Accidents aren’t happening like they had happened in the past,” Jones said. Sports-related injuries and contagious conditions beside COVID-19 are down because people are doing so much mask wearing and social distancing, which is offsetting the added costs of treating the coronavirus.

Higher than normal unemployment levels could also impact insurers’ commercial business, although from a hospital’s perspective, the changes could be offset in part by greater enrollment in public plans.

A Deloitte survey published in August found that many health plans are counting on expected enrollment increases in the Affordable Care Act exchanges and Medicaid in 2021. As the economy rebounds, Deloitte estimated that health plans will see more people churn through their coverage and flip between employer-sponsored plans to Medicaid or exchange selections.

During the December 2020 meeting of the Federal Reserve Board, Chairman Jerome Powell said he expects unemployment to decline to 5% in 2021, and gross domestic product to come in at 4.2%, with both figures improvements over previous expectations. Despite the upgrade, Powell expected the economy to still need the Fed’s support for some time, and the central bank will continue to buy up government-backed debt in 2021. The Fed also anticipates keeping interest rates at near-zero through 2023. “It is going to be a while before we really are back to the levels of labor market conditions that we had early this year,” Powell said.

Meanwhile, UnitedHealthcare expects to grow total membership across all its plans by 1.5 million people in 2021, with double-digit growth among its employer-sponsored and individual plans.

Insurers plan to focus on where their membership is growing. As the nation ages, the number of seniors enrolled in Medicare Advantage plans has grown rapidly over the past decade, with individuals increasingly choosing Advantage plans over traditional Medicare as they can get extra benefits not offered in the fee-for-service program and are familiar with being limited to a provider network and having an insurer manage their benefits.

The latest federal data shows that 25.5 million people were in Advantage plans as of November. In December, Moody’s reported that enrollment in Advantage plans had grown 10% throughout the year.

Cigna Corp. aims to grow its number of Advantage customers by 15% by the end of 2021. By the end of 2024, the Bloomfield, Conn.-based insurer aims to increase membership in its Advantage plans by 50%. 

“We’re systematically expanding our geographies, and we’ve added a new platform in terms of individual PPOs in 2020. So that continues to carry (us) forward,” Cigna CEO David Cordani said during the company’s third-quarter earnings call.

Another federally backed option may be on the horizon. Although the ACA’s fate is uncertain, with the Supreme Court expected to rule on its constitutionality in June, Brad Ellis, senior director of insurance at Fitch Ratings, said that he does not expect the law to be thrown out.

But a BidenCare plan could impact insurers, if President-elect Joe Biden succeeds in adding a public option, creating a competitor on the ACA exchange and automatically enrolling the lowest-income residents in coverage. 

“Our main concern is not in 2021,” Ellis said. “But the potential for a public option, we consider that to be a moderate credit negative in that it would essentially provide a competitor, especially in the individual market that could conceivably run at losses.”

Where and how patients and providers connect will continue to evolve in 2021.

Moody’s estimates that $250 billion, or approximately 20% of all Medicare, Medicaid and commercial outpatient, office and home health spending, could eventually be virtualized. In 2021, the ratings agency expects 76% of consumers to be currently using, or open to using, digital healthcare services, up from 46% from last year.

In January, Cigna also plans to introduce a new virtual care reimbursement policy to ensure continued coverage of virtual care post-COVID.

“People’s usage of digital and telehealth rose over the pandemic and we expect that progression to stay with us and perhaps even improve,” said Stefan Kahandaliyanage, an analyst and assistant vice president at Moody’s. “Beyond just talking to a specialist, perhaps having devices that better monitor or provide more in-home services.”

Priority Health plans to continue investing in its predictive analytics platform and virtual behavioral health tool. The insurer will also extend its zero cost-sharing for telehealth services policy to at least March.

Investments in digital tools to help improve patients’ health and lower insurers’ cost of care will continue into 2021, Fitch’s Ellis said. And even though Centene Corp. already announced a deal to buy behavioral health provider Magellan Health (see related story, above), large deals that transform the industry are unlikely. “We’ll continue to see smaller, strategic acquisitions by companies where they’ll acquire tech companies or specialty pharmacies,” Ellis said. “Some companies are expanding further into the provision of care, buying surgical centers and medical groups.””

Looking more broadly, Ellis said the growth in insurers’ Medicare Advantage business, and an eye toward investing in lower-cost care for members, will keep insurers’ finances stable in 2021.

“I think at the end of the full year, you’re going to see the health insurance sector perform fairly well,” he said. “The path is going to be difficult, but the destination will be good.”


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