As the Pandemic Rages on, Insurers Continue to Bring in Cash

For most Americans, 2020 was a terrible, horrible, no good, very bad year. But not for health insurance companies. As the year comes to a close, it is increasingly apparent that they are enjoying high levels of profitability. In their third quarter earnings reports, Humana, Cigna, and Centene reported $1.3 billion, $1.4, billion, and $538 million in profits, respectively. UnitedHealth reported the highest profit, $3.2 billion.

Most insurers explained away this quarter’s profits as resulting from a one-time payout from the ACA’s risk corridors program. They project a less financially stable picture moving forward. But is their naturally conservative outlook the right one, given that this year’s significant decline in health care utilization could continue well into 2021?

The main reason insurers turned significant profits this year is that consumers chose not to get elective procedures, delayed doctors’ visits, and neglected routine, preventive services. Cancer screenings and childhood immunizations have declined considerably. People were not only fearful of COVID-19 exposures in health care settings, but newly uninsured individuals also cited concerns about the cost of care in their reasoning for avoiding health care. In fact, Kaiser Family Foundation’s health system tracker recently found that COVID-19 has caused health care spending to decrease for the first time – ever.

Insurers warned in the early signs of their financial windfall that this low utilization would soon be reversed from pent up demand. However, this has yet to fully come to fruition, especially as the pandemic continues to surge across the country, with only dire predictions ahead for the upcoming holiday season. Providers and patients have continued to postpone elective procedures as hospitals brace for the next surge of COVID-19 admissions. Furthermore, the economy appears increasingly unlikely to bounce back quickly, meaning that consumers will have less disposable income to spend on discretionary health care services.

Insurers further cautioned that the need to pay for new treatments and vaccines is creating uncertainty over their liabilities in 2021 and beyond. However, they should take comfort in the fact that the first two vaccines – Pfizer’s and Moderna’s – will  be priced similarly to the flu shot, at $39 and $50 per patient, respectively.

These trends suggest that next year will once again be a profitable one for insurers. To date, many insurers are using their extra funds to provide temporary premium relief. However, as we’ve noted in previous posts, policymakers should consider how insurers’ excess cash could best be deployed to help combat the pandemic. Even with the vaccine doses rolling into hospitals and nursing homes nationwide, the need for widespread and frequent testing for COVID-19 is not going away anytime soon. Yet federal funds to support free community testing are running out, states are strapped for cash, and many consumers continue to face unexpected charges for needed tests. Contributing to state and federal public health efforts, such as helping to pay for workplace and surveillance testing, would be a good place for insurers to start giving back to their communities.

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