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Viewpoints from David Wiesner
Altruism is not a term we usually associate with insurance companies. But with coronavirus (COVID-19) upon us, we have seen some interesting, almost altruistic behavior. Cigna and Humana announced they would cover all COVID-19 expenses on their insured plans, and others like Anthem soon followed. As a broker, we have been receiving notices that life, disability and dental carriers are providing 0% renewals for cases renewing in April, May and June. They seem like free money and gifts from your insurance carrier…but are they really?
With the appearance of COVID-19, nearly all elective surgeries and diagnostic procedures have been delayed and/or canceled. This is saving insurance companies millions. We are expecting our self-funded clients to see a 20% drop in loss ratios over the next couple of months due to all the delays in procedures. Granted some clients will have COVID-19 testing costs and a few (a minority) will have members who are hospitalized and possibly even in intensive care. Keep in mind, however, the common employer plan does not bear the burden of over-age-65 adults (the ones who are the most likely to suffer hospitalization due to COVID-19). The Federal Government, through Medicare, will bear the brunt of those costs – not the commercial carrier insuring your company. As such, the “giveaway” of no-employee-cost COVID-19 coverage is a small handout for the money your carrier will make during this crisis as services are delayed.
Likewise, the dental carriers are profiting even more. Dental offices around the country are simply closed, except for emergency procedures. For every month a dental office is closed your dental carrier is collecting 8.3% of your annual premium but incurring no claims. So those nice 0% renewals they are handing out once again are an easy giveaway – they have at least 8% padding and with the slowdown from social distancing, our guess is the dental carriers have more like a 2-month hiatus from claims or 16% padding.
When we get to the bulk of the nation’s insurance renewals for January 1 there should be a lot of questions asked about the actual loss ratio of premiums paid to actual claims paid in 2020. We expect to hear from many medical and prescription carriers the need to load the 2021 rates for the additional expense of COVID-19; absent any discussion of the claims that were foregone, or the oversupply of medications in people’s bathroom vanity. For larger employers who receive experience reports, you should consider self-funding in 2021 to avoid any carrier attempts to load rates to “recover” COVID-19 expenses.
We do not see the insurance carriers making these concessions around COVID-19 without their actuaries and finance department having already informed marketing and management that they will be just fine.