Industry Updates
Price Check

• Frank Klimko
• May 2020
• 

The cost to health insurers for testing and treating Americans infected with the coronavirus could amount up to $556 billion—about one quarter of the $2 trillion pandemic relief package—over the next two years, a new study said.

The actuarial study, done for America's Health Insurance Plans by Wakely Consulting Group, attempted to quantify a cumulative price tag for COVID-19 testing/treatment for 2020 and 2021. Costs ranged from $56 billion to $556 billion over the two-year time period, depending on whether the national infection rate is at the low end of 10% or the higher end of 60%.

It looked at the impact across commercial, Medicare Advantage and Medicaid managed care lines.

“This new data provides us with better insight to help policymakers, private sector leaders and other stakeholders understand the investments required to successfully care for every American subjected to this life-threatening virus,” Matt Eyles, president and chief executive officer of AHIP, said in a statement.

Assuming a 20% infection rate, the report estimates that more than 50 million Americans will become infected, at least 5.5 million will require hospitalization and 1.3 million will require intensive care. For each person admitted into intensive care, costs, on average, could exceed $30,000, AHIP said.

“As significant an impact as the virus has already had in several countries around the world, and in several states, the potential impact of the continued virus proliferation on our health care system could be immense,” the report said.

It warned a wide variation in variables made it difficult to cast precise cost projections.

“Given the asymptomatic nature of many confirmed COVID-19 cases and gaps in U.S. testing capacity from the outset of the crisis, it is impossible at this stage to identify the true incidence rate,” it said.

In a March 19 commentary, AM Best said its outlook for the health insurance industry currently remains stable.

“AM Best acknowledges that there is a potential for deterioration in capital from both an earnings and investment perspective,” it said. “However, the favorable earnings trends over the past few years has resulted in the strengthening of risk-adjusted capitalization for health insurers, which should aid in withstanding the financial impacts, both claims and investment market related, of the coronavirus.”

AHIP appealed to congressional leaders for help.

It urged Congress to open a special COVID-19 enrollment period for the Heathcare.gov Affordable Care Act exchanges, extend premium subsidies and create a temporary pandemic federal risk mitigation program to stabilize carriers hit by outsized coronavirus claims.