The credit outlook for health insurers is stable for next year, though several trends to watch in 2021 could have a notable financial impact, according to a new report from Moody's Investors Service.
Moody's analysts expect the macroeconomic trends to be manageable for health plans next year, according to the report, with moderate earnings growth and telehealth and value-based care models helping to drive down cost pressures.
However, three key factors could turn that outlook negative, Moody's said: the pandemic, health policy changes or a worsened economic downturn. For example, insurers are likely to continue waiving costs for treatment and testing associated with COVID-19 through the middle of next year, if not longer.
The significant decreases in care utilization are unlikely to continue at the same high levels seen in 2020, which boosted profits for insurers in a big way this year, according to the report. In addition, a weak economy could put pressure on enrollment if people continue to lose commercial coverage, though increases in Medicaid or Medicare enrollment can help offset this.
"The US health insurance industry successfully managed the coronavirus pandemic in 2020 and will do so again in 2021," Moody's Assistant Vice President Stefan Kahandaliyanage said in a statement.
"Coronavirus costs, including vaccines, are largely incorporated into 2021 pricing, and COVID is a key catalyst for telehealth utilization, a positive from a customer engagement and cost perspective," Kahandaliyanage said. "We believe the uncertainty of the macro environment will continue to drive enrollment in government businesses but will hamper commercial earnings growth due to high unemployment."
The report also notes that Moody's analysts give President-elect Joe Biden's health policy proposals a "mixed" credit impact, with efforts to expand enrollment in the Affordable Care Act's exchanges likely positive for insurers.
A public option, however, could put negative pressure on the lucrative commercial market, Moody's said.
Also hanging over the entire discussion is the pending Supreme Court decision that holds the entire ACA in the balance. A ruling is expected as early as February, legal experts said, and the court could potentially strike down the law in full.
Legal analysts said oral arguments last month suggest that the majority of the law will be safe, but also cautioned against reading too deeply into questioning during such hearings.