The National Association of Insurance Commissioners has been monitoring the impact of climate change on insurance, including health, property and life coverage, for more than a decade.
It first released a white paper (PDF) on the insurance risk associated with climate change in 2008, and now administers a climate risk disclosure survey that tracks whether insurers give the issue the same weight.
Still, while Mike Kreidler, Washington state’s insurance commissioner and an NAIC member, told FierceHealthcare that health insurers have a “growing interest” in the potential impacts of climate change, they aren't exactly adapting at a “meteoric pace.”
A 2016 analysis of such survey data from 148 insurance companies across various business sectors found that 71% of had “minimal” risk governance on climate in place, meaning that the state’s executives and boards rarely engaged with climate risk data. Responses from health insurers to the NAIC’s risk assessment survey from 2018 indicate that many have environmental policies in place to manage their carbon footprint, but few have formal procedures to monitor and manage the risks associated with climate change.
“I think it’s partly because they see themselves as being much more isolated from the climate changes they see taking place,” Kreidler said. “And, quite frankly, they will just adjust premiums to compensate for whatever diseases come along.”
That could be ill-advised.
In a report released this summer, Moody’s called environmental and social factors a growing credit risk for insurers.
“Climate change in particular gives rise to greater uncertainty for insurers, both with respect to expectations for frequency and severity of natural catastrophes, and exposure to carbon transition risk through their investment portfolios and the possibility of stranded assets,” Brandan Holmes, vice president and senior credit officer at Moody’s, said in a statement.
The report identified five categories of environmental risks that could have the greatest impact on insurers’ credit, with some impacting certain sectors more than others—natural and man-made hazards, for example, are the highest risk for property insurers compared to other types of insurance.
Among those insurers which did disclose perceived risks was Cigna, which noted that there were reputational risks alongside potential business risks in failing to take steps to address climate change. However, others, such as EmblemHealth, said they did not perceive any business risks at all associated with climate change, the NAIC survey found.
- Premium pressures: The health effects from climate change are likely to put even more cost pressure on payers that could cause premiums to rise. Medicare will be inordinately impacted by climate change because of the populations it serves, one expert said.
“If you look at who is most vulnerable to the health effects of climate change it is older Americans and kids,” said Ashish Jha, M.D., a professor of global health at the Harvard T.H. Chan School of Public Health. “If you look at who pays for healthcare for older Americans and kids it is Medicare.” The primary way that climate change will affect people’s health will be through more intense heat waves, which older adults are especially vulnerable to, Jha said. “Climate change and changes in weather are happening at a rate that is much faster than we are able to adapt to, [and that] means the entire health system is going to get stressed,” he said.
- Exotic infectious disease outbreaks: Kreidler said that the higher risk of exotic disease is something that should make insurers stand up and pay attention. Providers they work with may not have working knowledge of these conditions, which can spread quickly. A more globalized society increases the risk of the spread of these diseases on its own, and climate change also leads to environmental changes that can be a fertile breeding ground for vectors such as mosquitoes, Kreidler said.
Even though it’s not up to payers to train doctors to treat diseases that may be rare in the U.S., they will feel the financial pain if they’re not ready for an outbreak, he said. “They’ve been somewhat feeling immune to the issue and see it as more of a property or casualty [insurance] problem,” Kreidler said, “but at the same time they obviously have to worry about if there’s a major outbreak in disease.”
- Population displacement: Another major concern is population displacement because of more intense storms and hurricanes.
“People will seek healthcare and there are open questions about what that means to insurance markets,” said Ari Bernstein, M.D., a hospitalist at Boston Children’s Hospital and climate change researcher. “Often people who are displaced against their will don’t have the best health status.”
Greater displacement will lead to higher costs as patients will likely head to emergency rooms to address routine healthcare needs such as dialysis, Bernstein added. “If you are a 75-year-old on dialysis and you have to move out to a different city because of flooding, that is hugely harmful from a health point of view,” Jha said.
Beneficiaries could also just put off addressing healthcare needs. A January 2019 study looked at health utilization rates of older individuals with diabetes from 2002 to 2004 before Hurricane Katrina hit New Orleans in 2005. It found that utilization rates were lower for the same group from 2006 to 2008 after the hurricane and that the low rates persisted for years.
- Increased stressors linked to social determinants:
Identifying and treating social determinants of health will become increasingly important for Medicare as climate change impacts their beneficiaries. “CMS should be funding how do we keep people healthy and out of emergency rooms during storms and heat waves brought on because of climate change,” Jha said.
CMS is making efforts to address value-based care, including promoting payment models that reward doctors and hospitals for lowering costs. The agency is also running the Accountable Health Care Communities Model that tests if identifying healthcare needs of Medicare and Medicaid beneficiaries via screenings or referrals can impact costs and reduce healthcare utilization. Thirty organizations are currently participating in the model, according to CMS. But the model’s screening tool used by participants to identify health-related social needs does not include any questions about climate-related topics such as exposure to extreme heat. It instead focuses on issues such as housing and food instability and transportation problems, among other topics.
CMS did not return a request for comment as of press time.
But insurers and CMS need to do better to handle the costs expected to come from climate change, Bernstein said. “Insurers, providers and [patients] are never going to do well if the burden of disease is so great that it doesn’t matter what kind of insurance model you are talking about,” he said
- Investment portfolio vulnerabilities: Another area that health insurers should focus on, Kreidler said, is building an investment portfolio that prepares them for the uncertain future. Some insurers, such as Kaiser Permanente, have cash reserves that would allow them to address climate-related emergencies more quickly. Kreidler said that the industry is already beginning to see significant changes in investment plans, such as swapping coal electricity for more green energy sources.
However, to achieve these goals, Kreidler said there needs to be far more unity and consensus on the fact that climate change needs to be addressed.
“If there was an asteroid coming in, we’d all be linking arms and saying, ‘How do we do this together?’” Kreidler said. “The effects would be devastating and that‘s the kind of threat that we have right now to this planet.”
Chart contributed by Data Editor Eli Richman.