Approximately 49 percent of the U.S. population is covered by employer-sponsored health plans (2018 figures from the Census Bureau’s American Community Survey 2008-2018 sponsored by the Kaiser Family Foundation). Health insurers are partnering with their insureds to navigate issues around employers’ and employees’ ability to pay premiums for coverage, eligibility to participate in the plan and impacts on future pricing.
Prior to March 2020, policy grace periods were typically 30 days, but many states are requesting or mandating extensions, and individual state actions range in their scope. For example, an executive order was issued in New Jersey on April 9 to extend the grace period to 60 days, with the provision that premiums can be paid on an installment basis over a 12-month period. Alternatively, insurance commissioners in Arizona and Florida are requesting that carriers work with their insureds on extending grace periods, maintaining claims payments during this extension and waiving late fees or interest.
Carriers are not commenting on anticipated rate renewal changes, but are instead opting to defer mid-term rate changes due to participation changes and other developments related to the renewal. As carriers move through their renewal cycles, the market consensus will likely become clearer.
As employers try to manage through the economic uncertainty, many have chosen to furlough workers or reduce employee hours to manage payroll expenses instead of closing facilities or laying people off. Prior to the COVID-19 outbreak, terms and conditions around eligibility remained fairly consistent in the market, with minimum work hours in place to define actively at work and COBRA in place in the event of layoffs. The current environment has prompted many carriers to temporarily amend these provisions. The duration of these provisions varies significantly from carrier to carrier, but all carriers agree that the option must be offered to all employees on a non-discriminatory basis. Larger employer groups under administrative services only (ASO) contracts have the flexibility to amend these conditions for their plan. Although many states are issuing regulations on copayments, grace periods and other policy terms, regulation on how to treat furloughed employees is less explicit. Regulations can vary significantly from state to state, with some encouraging carriers to be flexible and others setting requirements for policy cancellation, though the recent federal COBRA regulation provides a backstop for furloughed employees.
On May 4, the U.S. Labor and Treasury Departments temporarily extended the period during which an individual may select COBRA coverage. New regulations allow employees to select COBRA up to 60 days after the end of the declared disaster period. The current outbreak period is defined as March 1, 2020, to 60 days after the end of the declared national emergency or on another date in the future as determined by the Labor Department. Since COBRA is retroactive to the date of the qualifying event, insurers will also experience some enrollment uncertainty during this time. The Kaiser Family Foundation 2019 Employee Benefit Survey estimated that COBRA coverage is five times more expensive than typical payroll deductions, so COBRA would likely not be the first option. Employees could also access healthcare options by enrolling in coverage provided by the Affordable Care Act (ACA) or applying for Medicaid. The popularity of health savings accounts (HSAs) with high deductible plans and the amount of deductible exhausted will likely impact employee decisions on continuing coverage.