The Society of Actuaries launched a tool on Tuesday to help health insurers and state regulators predict how the COVID-19 pandemic will affect healthcare costs, as they determine premiums for 2021.
The publicly available tool, funded by a Robert Wood Johnson Foundation grant, allows users to come up with a range of forecasts for how healthcare costs could increase amid the COVID-19 outbreak compared to a scenario in which the pandemic never happened.
It is meant to facilitate conversations between insurers and regulators and help users "understand the first wave and plan for a variety of potential future scenarios of COVID-19, as well as to see how the different factors play out over time, such as when there is a vaccine and how insurers cover future costs," said Dale Hall, the Society of Actuaries' managing director of research.
Insurers are busy filing preliminary rates for Affordable Care Act plans to be sold next year, but the companies are struggling to figure out how to incorporate the potential costs for coronavirus tests and treatment into the rates, as well as how to address deferred care that doctors and patients have put off amid the crisis.
Unknowns about the length and severity of the pandemic, the potential for a vaccine, and what services health insurers will be forced to cover have made it difficult for insurers to set premiums. Many have left COVID-19 out of the rate calculation for 2021, noting in filings submitted to state regulators that they don't yet have enough data to make accurate predictions. While insurers have asked for relatively small increases in rates, or even decrease in some cases, most insurers said they may need to update their rates when more information becomes available.
The Society of Actuaries tool allows insurers and regulators to get on the same page by modeling a range of possibilities for the impact of the COVID-19 outbreak on costs over the next couple of years, depending on what level of social distancing is enforced and how many people are ultimately infected. It can be used for all lines of business, including individual, employer, Medicare Advantage and Medicaid plans.
The tool assumes that for every month in which a high level of social distancing is enforced, there would be a 4% drop in projected annual insured healthcare costs as patients put off care. It also assumes that 40% to 60% of that deferred care will be received at a later date when restrictions are relaxed.
The model also projects a range of treatment costs, from an increase of less than 1% to an increase of 18% of costs, for patients affected by COVID-19, depending on the infection rate. Users of the tool can also predict the future costs of diagnostic tests and a potential vaccine.
Individual market insurers in all states must turn in their proposed 2021 premiums for regulatory review by July 22. In states that use the federal HealthCare.gov marketplace, rates will be finalized by late August and publicly posted on Nov. 2.