Delayed Surgeries and Skipped Checkups Help Keep Insurers in Good Health

(Bloomberg) -- Covid-19 has thrown the health-care industry into turmoil, but one thing looks certain: Insurers will make money this year.

None of the five major health insurers that reported quarterly earnings in the past two weeks told investors to expect lower profits in 2020. That’s in large measure because of a staggering dropoff in claims tied to social-distancing measures put in place to arrest the pandemic. How long that trend will persist, however, is far from clear.

Patients who don’t need emergency care have postponed or skipped doctor visits, cancer screenings and surgeries. Under orders from states, hospitals and surgery centers across the U.S. canceled weeks of scheduled procedures to avoid spreading the virus and reserve beds, staff and supplies that might be needed to treat Covid-19 patients.

As new virus cases ebb in some areas and states look to re-open, the question for insurers is how much deferred care will be resumed, and how quickly. Several said they expect to see dramatically lower medical costs through June, with claims rebounding later in the year.

“Our expectation is that there will likely be a bounce back in the coming weeks and months,” Humana Inc. Chief Financial Officer Brian Kane told investors on an earnings call on Wednesday. Demand for medical care later in the year “could run over normal,” he said.

Care providers generally don’t expect regular business to bounce back quickly. Hospital chain HCA Healthcare Inc. said some categories of care, like outpatient surgeries, have fallen 70%. It said last week that it anticipates resuming some deferred procedures soon, but not all at once.

Medical costs later in the year and beyond will depend on the pace at which activity is allowed to pick up and how confident patients are that it’s safe to set foot in hospitals. And renewed waves of coronavirus infections could trigger more shutdowns or cause people to further delay or avoid treatment.

Additional waves of illness are “probably less a matter of ‘if’ and more a matter of ‘when’ and ‘how many,’” Cori Uccello, senior health fellow at the American Academy of Actuaries, said in a briefing. Health costs this year could wind up being higher or lower than expected, Uccello said, depending on whether deferred care is delayed to later this year, next year or skipped entirely.

Uncertainty Reigns

Investors obsess over small changes in health insurers’ medical-loss ratio, which gauges how much of the money that an insurer collects is paid to medical providers. During the Covid-19 pandemic, premiums from employers, government programs, and individuals are still flowing in even as claims drop. That should give insurers an ample cushion if costs swell down the road.

Meanwhile, insurers are preparing to file preliminary rates for 2021 with regulators. Despite early predictions that Covid-19 might cause premiums to spike, in most states “the carriers are not currently getting hit materially by those costs,” said David Dillon, a fellow at the Society of Actuaries who helps review rate filings in eight states.

Total claims cost is down about 30% even as insurers cover members’ co-pays and other expenses for Covid-19 testing and treatment, Dillon said. Some insurers are even baking the expectation of lower emergency visits into their projections for 2021.

If lots of care is deferred and coronavirus infection levels remain low, costs for employer health plans in 2020 could drop by as much as 4.5%, according to an analysis from consultant and benefits broker Willis Towers Watson.

Some expenses will return. Bum knees slated to be replaced in April might get postponed until summer or fall, but patients are unlikely to walk on them indefinitely. But other costs will dry up. A patient who skips a dental cleaning or mammogram is unlikely to double up the next year.

Pent-up demand for care may also run into limits on the health system’s capacity. That’s determined by everything from the supply of organs available for transplant to the number of surgeons who can operate.

Centene Corp. Chief Executive Officer Michael Neidorff said the insurer is preparing for multiple peaks of the pandemic that will disturb familiar patterns. “All I can really say is it’s going to be lumpy from quarter to quarter,” he said, “and it’s going to be very difficult to project it.”

Screen Time

A lot of medical care has switched to phone or video visits at a pace that would’ve been unimaginable before Covid-19.

Jeff Levin-Scherz, co-leader of the health management practice at Willis Towers Watson, said he saw his cardiologist virtually instead of in person. The doctor “answered all of my questions, and this took 15 minutes as opposed to a few hours,” he said in an email. “And I didn’t have to pay for hospital parking.”

For now, insurers are largely reimbursing for telehealth at rates equal to those of in-person visits, to alleviate doctors’ financial stress. How much of the bump in virtual care persists when the pandemic wanes may depend on whether reimbursements stay that high.

Meanwhile, insurers say they’re processing claims quickly, accelerating payments, and extending grace periods to clients. By law, insurers must rebate some money to customers if premiums exceed medical expenses by a certain threshold over time.

UnitedHealth Group Inc., the largest U.S. health insurer, suggested the company “may well find ourselves in a position where we can provide some additional premium relief,” beyond what the law requires, CEO Dave Wichmann said on an earnings call.

©2020 Bloomberg L.P.