Tag Archives: commercial health plans

How will COVID-19 affect medical loss ratios?

The medical loss ratio (MLR) measures a health plan’s spending on medical claims and allowable quality investments as a portion of total premium revenue net of taxes and allowable deductions. As a result of the COVID-19 pandemic, many healthcare services have been deferred and/or eliminated in 2020, leading to a reduction in 2020 claims relative to prior years. The claims reduction for the second quarter of 2020 was more pronounced due to lockdowns in most states.

Health plans have critical decisions to make in the upcoming months with limited data available and wide uncertainty on how the pandemic will transition toward the end of 2020 and into 2021.

In this paper, Milliman’s Andrew Bochner, Jennifer Carioto, and Luis Maldonado explore how COVID-19 can affect a health plan’s MLR requirements. They also provide specific considerations for the commercial, Medicare Advantage, and Medicaid markets in 2020 and beyond.

COVID-19 and proposed ACA market premium impact

Expected costs related to COVID-19 may increase or decrease health insurance premiums in the Patient Protection and Affordable Care Act (ACA) commercial markets. When setting premiums for 2021, health insurers will consider a variety of factors related to virus, including the acute treatment and vaccination for COVID-19, changes in access and demand for healthcare, lasting effects on population health, economic effects on enrollment and utilization of care, and other operational effects.

The National Association of Insurance Commissioners (NAIC) has released a template to assist state regulators in their reviews of 2021 premium impact assumptions for COVID-19. The template outlines a number of pricing considerations.

As of June 15, 2020, six states and the District of Columbia have publicly released preliminary ACA premium rates for 2021. This paper by Milliman’s Dane Hansen, Andrew Bochner, and Emily DeAngelis examines the reported impact of COVID-19 on these rates.

COVID-19 and the future cost of coverage in the commercial health insurance market

Although pricing actuaries are trained to project future costs in environments of heightened risk, COVID-19 has introduced unprecedented disruption and uncertainty. The pandemic has affected all aspects of the healthcare industry and the American economy, altering the landscape in ways that may both increase and decrease expected costs. This volatile and uncertain environment also presents an extraordinary challenge for health plans developing rates for 2021 commercial coverage.

This paper by Milliman’s Jeff Milton-Hall, Tom Murawski, and Doug Norris is intended to help commercial health plans navigate this evolving environment. The authors discuss key considerations for how the pandemic and its aftermath could affect the cost of health insurance coverage in 2021.

Report highlights commercial health insurance financial results and emerging trends

Medical loss ratio data published by the Centers for Medicare and Medicaid Services (CMS) provides a detailed picture of insurer financial results from the fourth full year of Patient Protection and Affordable Care Act (ACA) implementation. This data, supplemented with CMS marketplace and statutory financial data through calendar year 2018, illustrates continued stability in group insurance markets in terms of both enrollment and insurer financial results. However, the individual market is experiencing declining enrollment outside the insurance marketplaces and yet significantly improved financial results for the insurers relative to 2014 through 2016.

Individual market enrollment declines prompted several state-based initiatives to improve affordability for nonsubsidized consumers. As of April 2018, seven states have received approval from CMS for a Section 1332 State Innovation Waiver for implementing a state-based reinsurance program to improve premium affordability. The impetus for these state-based initiatives, which primarily benefit consumers not qualifying for federal premium assistance, is supported by a number of national enrollment trends.

  • National off-marketplace enrollment for ACA-compliant coverage declined from 4.9 million in 2016 to 2.4 million in 2018.
  • Marketplace Advance Premium Tax Credit (APTC) consumers represented 56% of national ACA-compliant enrollment in 2016, increasing to approximately 70% in 2018.
  • Marketplace APTC enrollment has remained relatively stable from 2016 to 2018, varying from 8.2 million to 8.6 million across the three-year period.

While individual market enrollment continued to decline in 2018, underwriting margins reported in year-end financial statements indicate the health insurance industry’s margins improved. The individual market experienced a nearly 10% underwriting loss in 2015 compared to underwriting gains likely approaching 10% in 2018.

This report, written by Paul Houchens, Jason Clarkson, and Jason Melek, provides a detailed review of the commercial health insurance industry’s financial results in 2017 and evaluates changes in the market’s expense structure and enrollment relative to prior years. It also discusses emerging financial trends for the commercial health insurance markets.

How will the elimination of the individual mandate affect enrollment rates?

The requirement that every American have healthcare coverage or pay a financial penalty was one of the key provisions of the Patient Protection and Affordable Care Act (ACA). Known as the individual mandate, it was one of the most controversial provisions of the ACA. Some questioned its legality and others questioned its effectiveness at driving insureds into the insurance pool.

The U.S. Supreme Court settled the issue of the mandate’s legality in 2012, ruling that attaching a financial penalty to a failure to purchase health insurance did not run afoul of the U.S. Constitution. This decision, though, did not settle the issue of its effectiveness. And in late 2017, Congress enacted the Tax Cuts and Jobs Act, which reduced the financial penalty to $0 beginning with the 2019 mandate year, effectively eliminating the individual mandate.

Understanding the impact of this change on the health insurance risk pool is important to both insurers offering ACA-compliant products and state policy makers evaluating alternatives to the individual mandate. Health insurers—now in the process of setting rates for 2019—need to understand how elimination of the individual mandate penalty will affect future enrollment rates, which have a significant impact on rate projections. Some states are considering implementing state-based individual mandates, in some cases in conjunction with a Section 1332 State Innovation waiver.

In this paper, Milliman’s Andrew Bourg, Fritz Busch, and Stacey Muller discuss the significance of the individual mandate and model the impact of eliminating it.

Commercial health insurance: Overview of 2016 financial results and emerging enrollment and premium data

In this report, Milliman’s Paul Houchens, Jason Clarkson, and Jason Melek provide a detailed review of the commercial health insurance industry’s financial results in 2016 and evaluate changes in the market’s expense structure and enrollment prior to relative years. They also provide enrollment and Advanced Premium Tax Credits estimates for 2017.