COVID-19 could cause insurance premiums to spike as much as $251B next year: report

A coronavirus blood test with money
The cost of covering the COVID-19 outbreak could cause major ripple effects for insurers planning for the 2021 coverage year now. (Getty/photovs)

The COVID-19 outbreak could cause premiums for individuals and employers to spike from 4% to 40% next year, a new analysis from California’s Affordable Care Act (ACA) exchange found.

The analysis, published Saturday by Covered California, said insurers are in the process of setting rates now for the 2021 coverage year. Those rates will likely have to factor in any costs for the COVID-19 outbreak that has spread across the country.

Covered California said the actuarial analysis underscores the need for the federal government to step in and help cover the costs for testing and treatment of the virus that has already exceeded 40,000 cases in the U.S.

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The state-run ACA exchange warned that more unsubsidized people could flee the exchanges, exacerbating a current trend. Smaller insurers could also risk insolvency, and employers may not be able to afford coverage due to the higher rates.

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The federal government would also be on the hook for the higher premiums in the form of ACA cost-sharing subsidies such as tax credits. Both federal and state governments could also pay more for Medicaid as individuals and employers drop coverage, the analysis found.

The analysis examines the projection for a nationwide outbreak where more than 100 million Americans will need to be tested.

Many major insurers have agreed to cover the cost of getting a COVID-19 test.

Treatment costs could also vary dramatically, as they could be roughly $30,000 per admission for COVID-19. That figure is based on Medicare rates and the average length of stay of 12 days, which is a similar length for other respiratory cases such as the flu or pneumonia.

“The one-year projected costs in the national commercial market range from $34 billion to $251 billion for testing, treatment and care specifically related to COVID-19—with the potential that costs could be higher than on the high end of the range,” Covered California said.

RELATED: As number of COVID-19 cases rises, many Americans fear costs of care, testing

Insurers will have to recoup those staggering costs by raising rates. It also remains unclear for insurers the costs associated with COVID-19 in 2021, which they will have to predict as they set their new rates.

Research on vaccines and antivirals is still underway, and it remains unclear whether COVID-19 is a seasonal virus like the flu.

“While projections of 2021 costs is difficult, we suggest that it is not prudent to plan today on lower costs related to COVID-19 in the 2021 calendar year than we project for 2020,” Covered California said. “Only when we know more about COVID-19 and whether drug treatments or a vaccine are effective should we consider modifying cost estimates for 2021.”

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