COVID-19, Recession And Racial Disparities: A New Agenda For America’s Health Plans

At the start of 2020, Americans’ primary healthcare concern was the affordability of care – focused largely on prescription pharmaceuticals and other unpredictable expenses. The landscape has now changed profoundly. The COVID-19 pandemic, economic dislocation, and increasing awareness of how racism affects the everyday life of all Americans has created an array of urgent new areas of focus in healthcare for American consumers.

Millions of Americans lost health insurance coverage when they lost their jobs; 45% report mental health issues driven by stress and anxiety; and virtually every healthcare facility is shadowed by uncertainty about safety protocols, PPE and readiness to resume treatments and procedures put on hold months ago. And we’re just getting started with this pandemic, as cases in southern states have begun to surge.

With the country focused on this new healthcare landscape, and with the 2020 election coming into view, the mandate for healthcare companies to work together to transform our system to focus on patients’ health and wellbeing has never been stronger. In many ways, health plans – with their ready access to patient information and responsibility to deliver high value care – are uniquely situated to make a profound difference.

This week, America’s Health Insurance Plans (AHIP) is hosting its Institute and Expo online. Here, I’ll take a look at the impact of COVID-19 on different healthcare sectors, with an eye to the likely ripple effects on other sectors and across the system as a whole. This week, I’m focusing on health plans. In the weeks to come, I’ll explore providers, health IT and the pharmaceutical sector.

Deferred or Eliminated Medical Care

For physician practices, surgical centers and hospitals across the country, the shock of state governments’ suspending elective procedures was financially devastating, sending aftershocks throughout the healthcare industry.  While patients have started to return for medical care, the reverberations of the past few months will be with us for some time. For health plans, one area of focus is low Medical Loss Ratios (MLRs).

An MLR is the proportion of premium revenues spent on clinical services and quality improvement, as opposed to administrative costs. Insurance companies are required to maintain MLRs of at least 80-85%. If they fail to meet this standard in any given year, the companies are required to provide a rebate to customers. In the case of Medicare and Medicaid recipients, that customer is the state government.

Lower MLRs were expected, even if how much lower and for how long remained uncertain. But as the financial burdens of pandemic and looming recession continue to mount, with providers struggling to stay afloat, demand for behavioral health services rising and public health as a whole at risk, states required to balance budgets are eyeing insurers’ full coffers.

Addressing Consumer Needs

Many insurers have been proactive in deploying excess funds: reducing copays, investing in telemedicine, and taking measures that address social determinants of health (SDOH), such as allowing nurse practitioners to prescribe medicines — particularly important in areas where physicians are in short supply.  Some plans are also supporting hospitals directly.

Taking these measures is not without risk for insurance companies. Prospective planning for quality and premium setting initiatives for 2021 is complicated by the myriad uncertainties related to economic conditions, healthcare utilization, COVID-19 incidence, and the requirements and availability of testing, diagnostics and vaccination.

But health plans are understandably emerging as primary business partners of the federal government as the healthcare system shifts from a pay-for-volume to a pay-for-value paradigm. Their increased tolerance for such risk demonstrates a growing collaborative approach that COVID-19 has helped to accelerate. And this collaborative approach will be essential in the months ahead.

Shifting Coverage Dynamics

Healthcare coverage is now emerging as the primary issue in the 2020 election. If we reach 25% unemployment, Avalere projections show that as many as 40 million Americans could be uninsured. This, as well as a possible age reduction for Medicare eligibility, point almost certainly to even larger enrollment in government health coverage across Medicare, Medicaid and healthcare exchanges.

Medicare Advantage as a percentage of total Medicare enrollment has been growing steadily since 2007, with robust 2019 to 2020 enrollment growth. In a recessionary environment, a rising government presence in managed care is to be expected. The ongoing uncertainty wrought by COVID-19 will only drive beneficiaries’ need for the predictability, stability, lower out-of-pocket costs, and broader benefits that come along with this option.

Due to COVID-19, Medicaid has become a massive growth market for the plans. Medicaid was already growing before the pandemic, and this will continue as states anticipate rising need due to losses of employee-sponsored coverage and durable enrollment through recession and recovery. During the last two recessions, Medicaid growth averaged 10% and 7% annually, but since then, the Affordable Care Act’s Medicaid expansion has made for a much larger safety net. The economic rebound that all of us hope will occur soon would erase some, but not all, of this Medicaid enrollment growth.

In addition, COVID-19 is spotlighting the critical role that public health infrastructure plays on the quality, cost and provision of health care. Pandemics do not stop at state borders; nor is locking down communities a viable solution for any length of time. How and by whom public health measures take shape remains to be seen, but it most certainly will hinge on collaborative efforts between government and insurance plans.

Tackling Racial Disparities

With their increasing focus on social determinants of health and use of data to identify and address unmet medical needs, health plans are uniquely situated to identify and address racial disparities in healthcare. Having access to a range of demographic and medical information, plans know a lot about their beneficiaries. Additional data can be obtained directly from each beneficiary to enrich what is already known.

Plans are also adept at addressing unmet medical needs. For example, the federal government pays plans to improve the quality of care, and as a result, cholesterol levels and blood sugar levels are often better in managed populations due to these programs. Imagine what would be possible if the government also started paying for the elimination of disparities. Clearly, the issues are complex and could not be eliminated by plans, but financial incentives have proven to work in the past with social issues. Meeting this challenge is surely a generational imperative for all of us working in healthcare today.

COVID-19, the recession, and disparities will be the primary forces defining the operating environment for health plans in the coming years. Navigating this uncharted territory as partners committed to transparency, cognizant of how interdependent not only healthcare sectors but our communities and economy are, looks to be the clearest path forward for health plans today.