The nation's largest commercial health insurers do not seem dismayed by the novel coronavirus' threat to their businesses, even though more than 1 million Americans have tested positive for COVID-19 and millions have lost jobs, risking their employer-based coverage.
Top insurance executives were largely sanguine about the outlook for the year as they divulged the results of their first quarters, which captured just the initial impact of the pandemic. They were largely unscathed.
All of the nation's largest private insurers reaffirmed their earnings outlook for the full year, and Cigna went as far as to say it expects to hit its earnings target for next year, raising questions about why executives are confident about their prospects despite being in the middle of a public health crisis.
"We recognize, no doubt, that the current environment is highly disrupted, however, we believe the goal is both achievable and remains an appropriate target," Cigna CEO David Cordani said in response to an analyst question about why executives were reiterating the 2021 outlook, too.
The major driver is that fewer Americans are seeking out traditional treatment options amid orders to stay at home and limit the spread of the virus. That's depressing utilization — a boon for insurers.
"The vast majority of the country's hospitals are less full today than what they would normally be, and the cost to the insurer for the cases that are in those hospitals are lower," David Windley, an analyst with Jefferies, told Healthcare Dive.
The nation's hospital chains have disclosed volumes plummeted in the last weeks of March as states and municipalities across the country implemented social gathering restrictions and freezes on elective procedures.
Still, some are more skeptical about insurers expectations for the year given the long road ahead.
"Just because first quarter is looking positive for insurers doesn't mean that trend will continue throughout this year or into next year, especially as pent-up demand picks up," Cynthia Cox, vice president at the Kaiser Family Foundation, told Healthcare Dive.
Even though insurers retained their annual guidance projections, that doesn't necessarily show confidence, Dean Ungar, vice president and senior credit officer at Moody's Investors Service, told Healthcare Dive. It seemed to him that insurers kept guidance because there is so much that's still unknown to provide something different.
Many companies pulled other detailed guidance measured as they maintained their stance on earnings.
Insurers know "the most important guidance to the street and the analysts is the earnings guidance." And there "are a lot of ways to control your earnings per share. It's more controllable than any one, particular number," Ungar said, pointing to share repurchasing and curbing expenses if revenues are lower than expected.
Not a 'one-for-one tradeoff'
Even though millions have fallen sick, insurers haven't been overwhelmed by the sheer amount of COVID-19 patients in terms of costs.
Any added COVID-19 costs are mitigated by depressed patient volumes, and Windley noted the cost of previously scheduled procedures and one COVID-19 case are not equal.
"The procedure volumes are down so much and it's not a one-for-one tradeoff," he said. "The loss of the full knee, or hip, or TAVR procedure is a lot higher than the cost to treat the COVID patient."
In short, insurers largely are not spending as much as they normally would on members, particularly in March, April and potentially into May.
But one key question remains: How fast will demand for care come back into the healthcare system as Americans are able to resume aspects of daily life?
One of the nation's largest hospital chains offered some clues during its first quarters earnings call this week, characterizing May as the beginning of the recovery for its operations. Tenet said it has already started resuming elective procedures in some locations and noted the demand has increased "rapidly" among backlogged cases at its outpatient surgery business, USPI.
More complex cases are coming back more quickly, such as spine, total joints and general surgery procedures, while gastroenterology, pain and ear, nose and throat cases are returning more slowly.
"We view May as the beginning of the recovery and are pleased with many facilities opening at 50% of pre-COVID surgeries last week and a more promising schedule this week," Tenet CEO Ron Rittenmeyer said. He added USPI has seen about 40% of its pre-COVID cases as it starts to reopen locations.
Centene CEO Michael Neidorff cautioned that the rest of the year may be choppy for the insurer as it's hard to predict when consumers will return to using healthcare services. However, in his conversations with providers, they told him they're trying to get consumers back in the door as soon as possible so patients don't lose confidence in hospitals.
"While I thought we may not see anything until July, third quarter, we may now see it in May and June starting to return, which means there will be a more normalized MLR," he said of demand.
But one of the more peculiar trends is the drop in ER volumes, particularly outside of areas like New York that are not overwhelmed with COVID-19 patients. Windley said it's a topic on the minds of healthcare executives and does not seem to have a clear explanation.
Certainly people aren't having fewer heart attacks or strokes.
"The hardest thing to explain is why are ER volumes down so much," Windley said. It's one trend that may temper expectations on a return to normal.
However, Ungar said it probably reveals how many people were using the emergency room as their doctor's office, which he said has been a real struggle for the industry.
Another wild card is hospital capacity. "The return of this deferred care to the system is also limited by the system’s capacity. There isn’t enough slack in the healthcare system to allow all of this deferred care to rush back through in 2020, regardless of when consumers are ready to return," Bradley Ellis, senior director for North American insurance ratings at Fitch, told Healthcare Dive.
Payers brace for shift to Medicaid, exchange plans amid record unemployment
As unemployment hits new records, some insurers are preparing for greater enrollment in their Medicaid book of business as well as in Affordable Care Act exchange plans.
Policy experts say the rising unemployment as a result of shuttering businesses to slow the spread of the virus could drastically alter the health insurance landscape as a majority of Americans receive coverage through their work.
Between 25 million and 45 million Americans could lose their job-based coverage, according to a study from the Urban Institute.
But not all who lose job-based coverage will become uninsured, in large part because of the ACA and the coverage options available.
Depending on the state, some will be able to turn to Medicaid while others may consider exchange plans.
"With historic levels of joblessness around the corner, millions of workers and their families are about to lose their employer coverage," Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, said in a statement. "Our safety net is about to be tested, and it's going to work a lot better in states that expanded Medicaid."
Molina, Centene and Anthem all said they expect upticks in their Medicaid membership and exchange products, by how much is still unclear.
Molina executives said in the month of April they already saw 30,000 more Medicaid members from the prior-year period, though CEO Joe Zubretsky said that is due to states suspending eligibility determinations, or not kicking people off coverage who may no longer be eligible. If states plan to suspend those programs, there will be less churn of members from Medicaid.
Policy, coverage changes
Major insurers have all waived cost-sharing — copays, deductibles and co-insurance — for testing and some have eliminated cost sharing for all COVID-19 treatment. In various ways, all the biggest insurers have relaxed pre-authorization requirements to speed up access to care. Some are reimbursing telehealth at the same rates of in-person visits.
Payers also have accelerated payments to providers struggling after key business lines were temporarily shuttered to respond to the pandemic.
"Insurers don't necessarily want hospitals or clinics to struggle financially, since that could lead to further provider consolidation and less negotiation power in the future," Cox said.
UnitedHealthcare said Friday it will give premium discounts to its fully-insured members between 5% and 20% while Cigna said it will cap drug costs for the newly uninsured.
Insurers are sensitive to the optics of the pandemic resulting in their financial gain.
"They don't want to look like profit mongers in this environment," Windley said.