It’s no surprise why auto insurers like State Farm and Geico are sending rebates to customers this spring and summer. No one’s driving, so accident claims are way down and insurers are paying out very little. No one expects drivers to make up for lost time by crashing their cars more often once they return to the roads. That means a dollar saved now on claims is a dollar saved forever. Insurance companies and state insurance commissioners realize this, too and that’s why the rebates are coming.
But you might be surprised that health insurers, starting with UnitedHealth are beginning to do the same thing. United is offering a 5 to 20 percent credit on June billing statements, which is the same order of magnitude as the auto insurers.
So the questions are:
- Aren’t insurers spending a fortune on the surge of COVID-19 patients as they overwhelm the medical system?
- What about the coming surge of deferred elective surgeries and the ‘train wrecks’ with acute or chronic conditions that have stayed away from the emergency room and doctor’s office? Won’t insurers need the money to pay for those when they return?
And the answers?
Insurers are spending a lot on some COVID-19 patients. Big bills are rolling in for hospitalized patients, especially those that land in the ICU and are on ventilators for weeks. But even though a lot of people are sick, it’s only the hospitalized patients that incur expenses. With no costly outpatient or drug treatments, overall COVID-19 costs are not so high. Also, many of these patients are older (Medicare) or poorer (Medicaid), not in United’s commercial markets, where the rebates are focused.
Other than COVID-19, the medical system is eerily quiet. Essentially the only other bills are for telemedicine, some cancer treatments, and medications for chronic illness.
We do hear about a coming ‘second wave’ of non-COVID-19 patients later this year as hospitals reschedule elective surgeries, people who have been avoiding the emergency room come back in worse shape, and chronic care patients incur more intensive treatments after declining.
These assumptions are driven by a combination of what seems like common sense, clinician desires to help patients, and wishful thinking by hospital financial chiefs.
But UnitedHealth knows something that others don’t: utilization and costs are not going to rise as fast as people assume. So insurers are getting out ahead of it before regulators, the ACA medical loss ratio requirements, and public opinion force their hand.
Here are some thoughts I shared a week ago.
After the surge: Hospitals prep to bring back regular patients while virus cases linger describes how hospitals are gearing up to work through the backlog of canceled appointments and procedures. Hospitals assume that there will be tremendous, pent up demand for their services. They are looking forward to getting back to normal with cases that pay the bills.
They will be in for a rude surprise, however, because many people will continue to stay away. Instead patients will use telemedicine, pursue less aggressive treatments, or just wait for time to heal what ails them. For years, healthcare experts and insurers have known that hospital care is over-utilized and sometimes dangerous. Now COVID-19 has done what co-pays, deductibles and hospital safety reports never could –keep patients away.
It’s no surprise that elective procedures and routine visits have plummeted. After all, hospitals canceled them. Surprisingly, the use of emergency rooms in Boston for strokes, heart attacks and appendicitis has also dropped by half during the emergency. Many emergency patients will return, but those with common issues like back pain and rashes will think twice or three times before coming in. Patients who are due for colonoscopies or mammograms will put them off even longer than usual.
May 11, 2020