Covid Likely To Drive Up Health Care Costs For Insurers, Analyst Says

COVID-19 is having a wide-ranging impact on the economy, but not so much on life insurance claims.

By John Hilton

Health insurers might be looking at higher long-term healthcare costs directly and indirectly related to the ongoing pandemic, a Fitch Ratings analyst said Tuesday.

The problem is twofold, explained Bradley S. Ellis, senior director, North American Health Insurance. For starters, many Americans have put off routine health exams and tests such as mammograms. Or they might not be able to schedule them amid a healthcare system stressed with COVID-19 patients.

"Perhaps a stage three cancer that would have been caught in a stage one had the person visited the doctor during the pandemic instead of deferring their diagnostic testing," Ellis said. "So that's something that may drive up to the medical loss ratios in the future."

Fitch hosted North America Insurance 2022 Outlook, a webcast reviewing the forecast for the life insurance property & casualty and health insurance sectors. The health insurance outlook for the year is neutral, Ellis noted, or "relatively unchanged" from 2021.

"It's been remarkable really how well health insurers have been able to manage the risk associated and the disruption associated with the virus pandemic," he added.

Fitch data shows little change in profitability in the health insurance sector from 2019 to 2020, Ellis explained, "which is amazing really, considering that, as you went into 2020, the industry did not know that we were going to have a pandemic. Pricing is typically set around six months before the prices actually take effect."

Long-Term Issues

Adding to the health care delay, Reuters reported this week that hospitals across the United States are postponing elective surgeries to free up staff and beds due to a surge in COVID-19 cases driven by the highly transmissible Omicron variant of the coronavirus.

"What we expect to happen in 2022 is really this deferral of health care, the routine testing, diagnostic testing, joint replacements, things like that," Ellis said, "which have kind of been cancelled, or at least delayed to make room for COVID-19 cases."

A second potential looming health care issue is the long-term prognosis of the COVID-19 victims themselves, Ellis explained. There are many unknowns about how exactly the virus is affecting the lungs and hearts of its victims.

"There are strong reports of damage, perhaps permanent, to the heart, in the brain, or other organs, the overall vascular system in terms of blood clotting," Ellis said. "So this is something that may cause long-term chronic illness, which we all know, chronic illnesses are the most expensive to treat."

Most health insurers are aware of the potential for long-term cost spikes and are pricing that into their products, Ellis said.

Medicare Advantage Concerns

In response to a question, Ellis expressed concerns about insurers' hunger for Medicare Advantage business.

Humana shares fell sharply last week after the health insurer cut its forecast for Medicare membership growth by about half. In a filing with the Securities and Exchange Commission, Humana said it expects to add 150,000 to 200,000 new members in Medicare Advantage plans this year, down from an earlier estimate of 325,000 to 375,000.

Terminations were much higher than expected during the recent enrollment window for 2022 Medicare coverage, Humana said.

"Aggressive pricing" is the concern for analysts, Ellis said. The Medicare Advantage market "is where a lot of companies are moving for growth and overall enrollment," he added. "There's not a lot of areas for growth otherwise. So this is the one area that a lot of companies that have Medicare Advantage offerings are focusing on and as a result it's very competitive."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.