How COVID-19 could affect individual Medicare premiums
By John Barkett,
Senior Director of Policy Affairs at Willis Towers Watson
Employers that offer retiree health benefits through a Medicare Marketplace depend on a stable underlying market for individual Medicare plans. A stable market is one in which carriers remain in the market from one year to the next, and premiums rise slowly and predictably. Early reporting suggested COVID-19 could cause premiums to skyrocket next year. But as the past few months have unfolded, analyses have shown insurers are poised to manage successfully through the uncertainty into the 2021 plan year. The news should bring comfort to employers and retirees relying on continued stability in the Medicare individual market.
In April, the two largest Medicare Advantage carriers, UnitedHealthcare and Humana, were both asked about 2021 in their Q1 earnings calls. Their comments were a mix of caution and optimism.
Tim Noel, UnitedHealthcare’s CEO of Medicare & Retirement, exuded confidence when asked to comment on the company’s 2021 Medicare rates:
“In 2021, as always, we strive to provide consistency and benefits for the members that we serve. We have a long track record of stable-to-improving benefits and have accomplished this in some challenging circumstances in the past.”
When asked a similar question, Humana CFO Brian Kane spoke cautiously:
“I think we're trying to be very prudent about how we think about the potential COVID impacts for 2021 and incorporate those into our pricing. So I think we're able to create a stable baseline here notwithstanding the potential meaningful volatility we will see in 2020.”
(UnitedHealthcare reports earnings next on July 15; Humana reports on August 5.)
In June, the Georgetown University Health Policy Institute’s Center on Health Insurance Reforms analyzed individual and family plan rate filings to determine how COVID-19 was driving rate increases. While these plans are not offered to Medicare beneficiaries, their rate filings provide insight into how Medicare carriers might be thinking about COVID-19 as a cost driver for 2021 premiums. This analysis showed that thus far insurers were “not asking for large rate increases due to COVID-19,” though the author speculated that continued uncertainty around the pandemic would cause insurers to increase their final rate requests.
Later on in June, researchers from the Urban Institute published research in which they asked 25 health insurance executives about the effects of COVID-19 on 2021 rates across all lines of business. They found “insurers’ experience with COVID-19-related costs thus far leads them to believe that the financial impact on 2021 costs (and thus premiums) is likely to be minimal.” Their reasoning: Depressed demand for services due to social distancing has outweighed the incremental cost of diagnosis and treatment of COVID-19 patients. The insurers seemed to suggest this dynamic would continue until a cure for COVID-19 was identified.
Insurers are in a strong financial position. No carriers have reported plans to exit their Medicare business due to COVID-19, and signs are pointing toward only modest effects on premiums next year, if any. It’s still early, and we won’t learn about final Medicare rate and benefit offerings until the fall. But signs are now pointed toward continued stability in the Medicare individual market in 2021.
