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AM Best warns of growing claims as coronavirus spreads in US

6th March 2020 - Author: Matt Sheehan

Rating agency AM Best has warned of a potential rise in claims for US health insurers due to the growing number of coronavirus cases and deaths being reported across the country.

More than 100,000 cases of coronavirus have now been confirmed globally, and an estimated 3,412 people are thought to have died due to the outbreak.

The majority of cases and deaths continue to be recorded in China, but numbers in other countries are now accelerating, with South Korea, Iran and Italy all counting cases in the thousands.

In the US, there have been 236 confirmed cases of coronavirus and 15 deaths at present count.

AM Best noted that the higher severity cases of the virus so far have occurred in the elderly and in individuals with pre-existing medical conditions or compromised immune systems.

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As such, exposure is expected to be greater for health insurers covering a large percentage of at-risk individuals—including those writing long-term care and support services (LTSS) contracts, Medicare and Medicaid, specifically special needs plans.

However, the rating agency acknowledged that several years of strong earnings has resulted in strengthening of risk-adjusted capitalization, which should allow health insurers to absorb any potential impact.

Health insurers also employ pandemic testing as part of their enterprise risk management programs, which should mean they are well-prepared to withstand a serious outbreak.

Another factor to consider is a potential decline in claims costs from the treatment of non-urgent conditions, as individuals may not want to risk being exposed to the coronavirus at a doctor’s office or emergency room.

In the US, the Centers for Disease Control and Prevention (CDC) is currently allowing the test for the coronavirus to be administered locally, and testing sites are popping up across a number of state-based locales.

In some cases, state health agencies may cover the cost of the test, although insurers could still be liable for the provider visit for the test, AM Best said.

Private laboratories are also beginning to test for the virus, and analysts expect health insurers to be liable for the testing and coronavirus treatment of their members in these cases.

The State of New York Department of Financial Services (DFS) has already stated that health insurers are to waive all cost-sharing for fully insured plans and Medicaid recipients for all claims related to testing, including visits to doctor’s offices, emergency rooms, and urgent care.

Additionally, the DFS is directing insurers to hold harmless any insureds who receive surprise medical bills for healthcare services.

AM Best expects other states to follow New York’s lead, given concerns that individuals may avoid getting tested or seeking treatment due to out-of-pocket costs.

At this time, AM Best has chosen to maintain its stable outlook on the US health insurance segment, although it said that this outlook could be re-evaluated as further information about the impact of the coronavirus spread becomes available.

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