The present world is, regarding the premium rate setting, a new and daring world because of COVID-19 pandemic. The American Academy of Actuaries Individual and Small Group Markets Committee annually releases a short but comprehensive account of the main factors that determine the level of premium changes of the year to come plan. The statistics this year are different and alarming.
The cost of hospitalization is rising high due to COVID-19. For instance though a guy in Seattle got through the virus strike, he however suffered more in terms of financial burden which ended to cost him $1.1 million.
Likewise, the demand of other medical services has declined significantly, including but not limited to non-emergency hospital services, and office visits—owing the pandemic. This has blatantly affected the direct spending on diagnosis and treatment of coronavirus disease, particularly during the first half of the year 2020. The main significance of the negative impact is the loss of insurance quotes by the employees.
“The COVID-19 pandemic has introduced significant uncertainty with respect to projecting 2021 claims levels,” the brief states. “The typical rating factors still apply, but issues surrounding the COVID-19 pandemic are a major consideration for rate setting and will impact both the individual and small group markets.”
In case of resultant rebate and more sever second wave of COVID-19 infections, the care deferrals will be further enhanced. On the other hand, the same will boost and multiply the average spending on coronavirus infection. According the estimates by the USC-Brookings Schaeffer Initiative for Health Policy, the current rate of 5% COVID-19 infection can expectedly increase the rate of claim made in the commercial insurance markets minimum by 1%; while the same of 60% can raise the claims by more or less 10%.
In 2021, the rate changes are expected to be under the greater impact of the major shifts in the enrollment rate of insurance coverage. The greater rush of those people is expected into the individual market, who are deprived by the pandemic form the employer-sponsored coverage and other insurance quotes. Others, however, may opt for exit in view of the much higher costs of insurance quotes, or due to getting eligibility for Medicaid.
The size and volume of change in net enrollment has no or very little impact here. Still it may start variation in the potential level of morbidity and danger. “[W]hen individuals lose coverage, they must decide whether to purchase coverage, and less-healthy people are generally thought to be more likely to purchase coverage than healthy individuals.”
The economic crunch and depression created due to the pandemic also has another repercussion. This may lead the lower employers, having healthy and fit workforce, to give smaller coverages, or may totally revert the coverage policy.
In addition to all these, there are other dynamics too, that may impact the rates negatively, like testing and treatment costs of COVID-19, rise in substance abuse treatments and mental health requirements, the provision of more sophisticated treatments and vaccines, changes in provider reimbursement rates, and changes in telehealth costs and utilizations.
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