Analysis conducted by California’s insurance marketplace, Covered California, suggests the US commercial health market’s projected costs for testing, treatment and care specifically related to COVID-19 could range from $34 billion to over $251 billion in the first year of the pandemic.
Over 170 million Americans are in the commercial health market, which includes the individual, small-group and large-group markets.
The analysis also found potential COVID-19 costs for 2020 could range from 2% of premium to more than 21% if they had been priced for.
Premiums in the individual and employer markets for 2021 – which are in the process of being set right now – could be 40% or more solely because of these unexpected COVID-19 costs in the absence of federal action, as insurers would seek to recoup unplanned for losses from 2020 and budget for pandemic-related costs in 2021.
Covered California’s chief actuary John Bertko prepared the report after engaging with external actuaries with expertise in the commercial health insurance markets and after analyzing expert clinical review and interviews with health insurance plan leaders.
“Given that insurers will be submitting 2021 rates in May and finalizing them around July 1, congressional action is needed very soon in order to affect 2021 premiums,” Bertko said.
“While there is a lot of uncertainty with anything related to COVID-19, one thing we can be certain of is that the impact will be significant, and now is the time to take action.”
“Covered California’s analysis shows the impact of COVID-19 will be significant, and that absent federal action, consumers, employers and our entire health care system may be facing unforeseen costs that could exceed $251 billion,” said Covered California Executive Director Peter V. Lee.
“Consumers will feel these costs through higher out-of-pocket expenses and premiums, as well as the potential of employers dropping coverage or shifting more costs to employees.”
Covered California suggested several actions that Congress could take to mitigate the potential impact of these cost increases on consumers.
They suggest enhancing the federal financial assistance provided in the individual market to increase the level of tax credits for those earning under 400% of the federal poverty level and expand subsidies to those earning more than 400% FPL as California implemented on a three-year basis in 2020.
Additionally, Covered California suggests establishing a temporary program to limit the costs of COVID-19 for health insurers, self-insured employers and those they cover, which would directly benefit individuals and small employers for 2020 and allow for more certainty in their pricing for 2021.