This article was published on March 21, 2020 in MyHealthGuide, written by Hobson D. Carroll, FSA, MAAA, President, MedRisk Actuarial Services, Inc.

After the President signed the Families First Coronavirus Response Act wherein testing for the virus may not attract any element of cost-sharing (think: preventive care), there has begun an additional new drum roll calling for any actual treatment for Covid-19 also be provided by all insurers on a zero cost-sharing basis.

Given the presumptive claim that American families don’t have enough to cover a $500 emergency to their household, and expected insurance plan copays, deductibles, and coinsurance for a hospital claim to treat the virus at levels exceeding $1,000, this was to be expected. I have no qualms with the thinking behind this.

  • However, given that this is a society-wide emergency, and in order to make the financing of necessary care carry as little administrative burden along with it, I should like to make the modest proposal that all services provided to care and treat Covid-19 patients (or the treatment for patients who contract the virus while in a hospital facility for any other reason) be payable at the same rate Medicare would allow.
  • All insurers would be required to “allow” this amount as covered by their plans (no matter what other provisions are stated in their insurance policy language or provider contracts), and all providers would agree to accept this amount as payment in full with a guarantee of no balance billing. This includes physicians as well as hospital or other facilities.

Coverage by any insurer would therefore be at “100%” of the Medicare allowed amount, with no cost sharing, and with no balance billing possible. Special “quick” adjudication and payment processes should be set up without significant difficulty to accommodate cash flow needs of providers. The trade-off of receiving 100% of what Medicare “pays” without having to chase any cost-sharing should be more than adequate for covering the “cost” of services in such a society-wide event that the pandemic represents, and also provides an offset to insurers for losing whatever cost-sharing would have represented versus normal contractual allowed amounts.

I believe such an arrangement is about as fair a way to handle the situation with all of us partners in helping to get through this stressful time without adding a set of totally unknown outcomes if each claim situation were to have to play out under existing contracts. It is not, and cannot be, “business as usual.”

Stop-loss Impact

Does the potential for claims arising on self-insured plans from Covid-19 have any possible impact on stop-loss carrier “reserves” back on 12/31/19?
Most actuaries involved in setting reserves for “unpaid claim liabilities” for stop-loss products, at least traditional specific and aggregate stop-loss, use a technique that involves projecting an “ultimate” loss ratio for all business on the books on the valuation date. This means projecting out to the end of each and every policy year of any plan in force on that date. So, if you just wrote an account at 10/1/19, it has 9 months of premium to run, and 9 months during which its “ultimate” estimated loss ratio can be exposed to an impact from Covid-19 claims. So, the quick answer is “yes,” the reserves at 12/31/19 “could” be affected.

Given the (still being formulated) age curve for the disease, and the affiliated expected cost for testing and treatment, how much it might impact the “total claims” of any employer self-insured plan is still a bit of a guess. Also, obviously, the claims would have to impact either the specific level on any one individual, or the aggregate level beyond the attachment point (typically 125% of original expected claims), and that pushes the impact even further away from the stop-loss protection.

However, that doesn’t mean that there isn’t any impact at all.

If we were to talk about more esoteric types of aggregate only coverage, or aggregate coverage where the attachment point to original expected claims is much lower than the traditional 125%, then it is actually possible to see some very real, leveraged (to the stop-loss premium) potential shifts in expected loss ratios. Whether or not the actuaries want to reflect or even address this at all in their reserve valuations at 12/31/19 is another matter entirely.