Contagious Disease Health Insurance

Could COVID-19 be a financial boon to health insurers?

Treating serious cases of COVID-19 is expensive. Treatment may require ICU beds, ventilators and lots of specialized staff time. So clearly, COVID-19 is destroying health insurers bottom lines…isn’t it?

Not according to a recent article by Kaiser Health News. Because of the quarantine, many individuals are delaying or foregoing elective surgeries. Of course, the costs associated with COVID-19 were unexpected, but the delay in these elective procedures is likely to more than offset this cost. Further, disease screening–such as cancer screening–is being put on hold and thus even necessary procedures are being foregone due to delayed screening. Thus, health insurers are experiencing significant cost savings and robust profits.

Earlier this month, UnitedHealth Group CEO David Wichmann told analysts that cost reductions so far are outstripping expenses for COVID-19 and that revenue is up compared with the previous year. He expects — barring a worsening situation — the rest of the year’s earnings to match projections. 

But are those profits likely to last? It is unclear.

COVID-19 has decimated the economy. As companies shut their doors and lay off employees, health insurers will have fewer enrollees. Further, once the stay-at-home order ends, there will be pent up demand for elective procedures and costs are likely to skyrocket. Further, COVID-related costs in the fall and winter may rise once again leading to another cycle of high intensive care unit costs.

Health plans could try to anticipate this risk by raising health insurance premiums. If they are risk averse, in fact, then premiums are likely to increase by more than likely cost since cost due to future COVID-19 outbreaks are so unclear.

In short, while COVID-19 has certainly been disastrous for patient health, the health insurance industry appears to be largely in fine financial shape.

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