This year is looking to be very similar to last year for health insurance companies: Older patients continue to defer care, COVID-19 costs are a burden and record profits are the end result.
Reality isn't matching expectations. Health insurance companies predicted a flood of patients who'd gotten sicker as they put off care during the first year of the pandemic would rush back. The assumption that medical expenses would rise was built into higher premiums for this year. But insurance companies guessed wrong and utilization remains depressed.
On net, this has worked out fine for insurers. Lower-than-expected costs tend to translate into higher profits, although the Affordable Care Act's medical-loss ratio rebates limit how much insurance companies can benefit financially when they overshoot on premiums.
Health insurers have eyed their surprise boon as a means to spend on new initiatives, said Adam Block, a public health professor at New York Medical College and founder of Charm Economics.
"Health plans are looking at these [claims] reductions and switches to telehealth—a less expensive platform—and thinking about ways that they can invest the savings into improving the health of their population," Block said.
Insurers are particularly focused on caring for the lucrative and growing Medicare Advantage population. Older people forgoing care makes it harder for insurers to anticipate their current and future medical needs. Incomplete information can lead to inaccurate risk scores, which can cut into Medicare reimbursements under the risk-adjustment program.
While patients are not deferring care at the levels reported this time last year, COVID-19 surges and vaccine hesitancy have led to a deluge of patients taking up costly hospital beds. Staffing shortages also have made it hard for individuals to schedule visits, leading older people to continue to forgo medical care, said Rick Kes, a healthcare senior policy analyst at RSM.
Appropriately modeling for these members' health and utilization poses the largest business risk faced by UnitedHealth Group's UnitedHealthcare, Humana and CVS Health's Aetna, the three largest Medicare Advantage carriers, Kes said. This risk is driving their investments for 2022 and beyond, he said.
"In 2020, a lot of health plans saw pretty favorable results, and I think there were some concerns that, 'We'll see this incredible return on claims and we'll see this big utilization in '21,'" Kes said. "I don't think we saw a watershed moment where everybody came back to the medical office."
Humana, UnitedHealthcare and Aetna declined to make executives available for interviews. Humana and UnitedHealthcare referred Modern Healthcare to their most recent earnings calls and Aetna declined to comment.
During Humana's third quarter, which ended Sept. 30, the company reported that Medicare Advantage utilization not related to COVID-19 dropped 7.7% compared to pre-pandemic levels. At the same time, in-patient care for older adults with coronavirus were higher than expected. The net result was a 1% decline in utilization among its Medicare Advantage enrollees.
Humana has focused on collecting risk scores and has gathered information on 92% of policyholders with diagnoses the company believes could affect revenue next year. Unlike competitors that rely on virtual-first visits to collect these data, Humana is counting on home visits and patient visits to its senior care centers to capture members' diagnoses.
"I don't know if [telehealth] would be a replacement or if we would want to motivate highly chronic members to have a virtual-first interaction for a whole host of reasons from a care point of view, and from the ability for us to establish the proper care plan," Humana CEO Bruce Broussard told analysts during the company's earnings call.
Over the past quarter, Humana has made seven acquisitions that gave it ownership of 21 more senior clinics. By the end of the year, the company expects to operate 200 CenterWell and Conviva offices nationwide. The insurer intends to open another 30 senior-focused clinics next year. Humana also recently paid an undisclosed sum to acquire onehome and announced plans buy Kindred At Home in bids to beef up its home care business.
At a high level, Humana's savings from fewer elective visit claims are offset by COVID-19 expenses, said Brad Ellis, senior director of North American Insurance Ratings at Fitch Ratings. But because this difference was not as large as Humana anticipated, the insurer lowered its profit expectations for this year but maintained its forecast for 2022.
"We've been kind of amazed by how the deferral of care has governed the medical loss ratios for these companies," Ellis said. "When you see a large surge in acute COVID-19 cases in the news, people start to defer care and stop going to a doctor or the hospital."
UnitedHealth Group has seen commercial policyholders continue to schedule elective visits, while Medicare and Medicaid enrollees have been slightly more likely to defer care, Chief Financial Officer John Rex said during the company's earnings call in October. The outcome of the push and pull between these two factors led the company to raise its earnings outlook for the third time this year.
After a spike in coronavirus visits in September, UnitedHealthcare believes the worst of COVID-19 is over. Meanwhile, the insurer has focused on capturing patient risk scores through in-person and virtual visits.
UnitedHealthcare enrolls its highest risk Medicare Advantage and Medicaid members in an intervention program in which care teams monitor patients' daily vitals at home to reduce inpatient admissions and mortality rates, Rex said.
"During these house calls, our registered nurses do an environmental scan of the home, a medication review and administer preventative tests," Rex said. "Last year, we made more than 1.7 million visits, including to more than 200,000 people living in rural areas, and will complete more than 2 million in 2021."
UnitedHealth Group's healthcare services arm, Optum, is conducting virtual visits with its primary care physicians and behavioral clinicians for all its patients, an approach that combines traditional and digital care.
This strategy mirrors Aetna's focus on blending CVS Pharmacy's 10,000-store footprint with digital sites of care as a way to enable patient access while cutting costs.
"They're bracing themselves like, 'What can happen to 2022 risk scores?' Because we still have a pandemic in 2021," said Deana Bell, principal actuary at Milliman. "The same issues could be in place—especially with different localized hotspots—and how do you manage that if people are too freaked out to go get their normal health care services and get those diagnosis codes recorded on their claims? It's hard to manage that for your revenue for the next year."