Given unemployment rates reached the highest level since the Great Depression in April, we were surprised to read Fierce Healthcare’s breakdown of a new Urban Institute report finding that the employer market will only contract by about 5% (7.3 million) amongst the 48 million living in families with someone who experiences a COVID-19-related job loss.
Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, said in a statement that the “loss of jobs and coverage associated with the pandemic is a huge test for our safety net, but it may not be the inflection point for the employer market that many predicted.”
The study acknowledges that if job losses hit other parts of the country and economy with different characteristics than their assumptions, findings could be quite different. In fact, there are a number of predictions of a wave of bankruptcies coming. If these occur, we could see more significant contraction in the employer market—and maybe the inflection point many have predicted.
If COVID-19 isn’t the inflection point, what can we expect?
Downward pressure on rates
Even a 5% decrease will increase competition. Employers’ exacerbated budget constraints due to the recession and COVID-19 surveillance testing also pressure health insurers and third-party administrators to help contain healthcare costs.
UnitedHealthcare, Aetna, Anthem and many Blue Cross Blue Shield plans are positioned to offset membership lost in the employer market with growth in their individual and/or Medicaid business. Many TPAs as well as Cigna have minimal individual market and Medicaid footprints. These companies may move aggressively to “buy” business.
Smaller employers may switch to ICHRA
2021 will not likely see significant uptake in Individual Coverage Health Reimbursement Arrangements (ICHRA). Given COVID-19, and consumers’ inability to access Affordable Care Act subsidies with ICHRA, many employers will seek stability in benefit strategies.
However, ICHRA provides small employers an alternative to dropping coverage.
Less impact from deferred care
In the individual and Medicaid markets, it can be challenging to take action now on deferred care due to churn and new enrollment. In the employer market, by contrast, non-COVID-19 healthcare costs could remain lower through much of 2021 if actions are taken now to address delayed care.
- Analytics to identify gaps in care and interventions to close those gaps
- Helping consumers identify treatment alternatives to prevent delays in care while supporting a shift to lower risk, lower cost alternatives
- Driving uptake of digital health and other care innovations, particularly for chronic conditions exacerbated by COVID-19 including mental health, obesity, cardiovascular disease and diabetes
A COVID-19 pricing factor?
Employers have a range of strategies available to proactively reduce risk of COVID-19. Proactive employers should highlight their programs and strategies as part of their negotiations. Self-insured employers should pay attention to reinsurance pricing for 2021 versus prior years.
Given that different industries have different COVID-19 risk profiles, perhaps we’ll see a COVID-19 risk factor based on SIC code.
Taking action in the midst of uncertainty
While 2021 may not be a tipping point, even in the face of a once-in-a-century global pandemic employers, TPAs and health insurers have a lot of power and influence over healthcare spending as well as adoption of innovation at scale to improve consumer experience, health and wellness.
Jaime Iosue Moran founded Shift Health Advisory LLC as a boutique advisory firm to accelerate time-to-market and scale for companies innovating in health insurance and care delivery.