As the COVID-19 situation is changing on a daily basis, the impact to the insurance and reinsurance markets is not yet fully known. However, given the significance of the developments, Guy Carpenter provides our view of how COVID-19 may impact the medical (re)insurance market.
At least one in seven working Americans is now unemployed. And as high as one in four Americans is unemployed or underemployed. This rapid economic shift has upended our country’s health insurance mix. As an immediate result, more Americans are rapidly losing their employer-sponsored healthcare coverage, with many now unable to afford their Affordable Care Act (ACA) plans’ high premiums, according to Akshay Jindal, Partner, and Frank Roberts, Principal, of Oliver Wyman Health & Life Sciences, Vivian Merker, Partner.in Oliver Wyman’s Financial Services Group, and Amy Zhang, Senior Consultant at Oliver Wyman. Oliver Wyman is an affiliate of Guy Carpenter.
The group commercial category will experience the biggest membership losses, according to various scenarios Oliver Wyman has run. The biggest drivers include direct loss of employment (and therefore direct loss of healthcare benefits) and pullbacks in healthcare benefits from employers. For example, at 15 percent unemployment, the group commercial segment will lose 17 million lives to the Medicare, Medicaid, individual and uninsured segments.
Which Health Plans are Most Exposed to the Membership Shift?
Health plans nationwide can be mapped on a spectrum of portfolio choices from deep specialization to multi-line diversified businesses. Across this spectrum, those health plans with a high dependence on commercial membership will likely see the most immediate and biggest impact on membership, cash flow and profitability. Even those employers who would like to continue offering healthcare benefits may be unable to afford the existing premiums given current economic conditions. Those health plans with a balanced portfolio will see material degradation in membership and margins. Each line of business is expected to see some margin erosion independent of membership movements.
Understanding the level of impact this mix shift will have on your health plan depends on several factors. Smaller plans may find it harder to manage large membership shocks. Plans with predominantly commercial businesses will see rapid membership erosion. Plans with high membership concentration in COVID-19 “hot spots” will face disproportionate membership losses.
Guy Carpenter has been developing a view of how COVID-19 may impact the medical (re)insurance market.