Insurers caught the attention of lawmakers after posting staggering profits for the second quarter, but experts caution that critics may need to take a longer view of insurers’ performance as the COVID-19 pandemic and its effects are far from over.
Democrats on the House Committee on Energy and Commerce said they were launching an inquiry into health and dental insurers after reports of “record profit margins during the COVID-19 pandemic,” the announcement noted.
Chairman Frank Pallone Jr., a Democrat from New Jersey, said he’s interested in determining what insurers can do immediately to help consumers during this crisis.
“While the American people grapple with an unprecedented crisis, health and dental insurance companies appear to be making record profits as millions of people forego care and avoid doctors’ offices,” Pallone said in a statement.
In fact, UnitedHealth Group, Centene and Anthem all doubled their profits (or more) in the second quarter of 2020 compared to the same quarter in 2019.
Though insurers have waived out-of-pocket costs and copays and have encouraged telehealth visits as patient volumes have dropped. One estimate shows that 30 million people were enrolled in a plan that had waived cost-sharing for telehealth services.
“No one wants to see health plans profit from Covid, and that’s why you see health plans publicly embracing discussions with state Medicaid officials, governors, and the federal government on the most appropriate way to handle overages,” said Dan Mendelson, founder of consulting firm Avalere Health.
Those overages are essentially protections against excessive profits. The Affordable Care Act ensures that the majority of premium dollars individuals pay for certain plans are spent on their actual care — not administrative costs like salaries and marketing expenses.
The ACA requires insurers that cover individuals and small groups to spend at least 80% of premiums on healthcare benefits. For insurers covering large group plans, that figure increases to 85%. If insurers fail to meet these thresholds, they must issue rebates to customers.
Last year, insurers rebated a record total of $1.4 billion to plans and consumers, according to the Kaiser Family Foundation.
“This is exactly what the ACA’s rebate rule protects against. Insurers are making a lot of profits right now, but because of the ACA, they will have to return some of those profits to people and businesses buying coverage,” Cynthia Cox, vice president of Kaiser Family Foundation, said.
Though there is a slight hitch to that rule. The potential rebates insurers would pay are based on a three-year rolling average — the nation has so far only weathered two quarters of the coronavirus crisis. And while insurers are benefiting from the pandemic now, that’s likely to change.
“One thing that we can be certain of is that the lower level of claims cost experienced in the second quarter will not continue indefinitely,” Bradley Ellis, senior director of North American insurance ratings for Fitch Ratings, said.
Ellis added, “It is also quite possible that we will see an increase in severity and cost of claims in the coming quarters as conditions have worsened or diseases have eluded early diagnosis due to delay in routine examinations.”
It’s why Linda Blumberg, a fellow at Urban Institute, thinks a congressional inquiry may be premature or not necessary at this time.
The rebates might not be paid for awhile due to how they’re calculated, Blumberg said. “However, I’m guessing they will do it faster due to appearances. To be fair to them, it is unclear how much of this foregone care will end up being delivered later in the calendar year, next year, or just never be provided, so having a little more time and information would be helpful,” Blumberg said.
As the country struggles to address the public health crisis, some wonder whether this is an opportunity to think outside the box to leverage those excess profits for other pressing needs.
“We have huge public health obligations at the moment and we don’t know how to finance it,” Sabrina Corlette, founder, and co-director of the Center on Health Insurance Reforms at Georgetown University, said, pointing to testing costs as an example and how to pay for accommodations for those who can’t quarantine at home.