Illinois' dominant insurer isn't sharing COVID-related savings with customers

Some health insurers benefiting from a COVID-fueled decline in nonemergency medical care are offering customers billions of dollars in financial relief. Blue Cross & Blue Shield of Illinois' parent isn't one of them.

Insurance companies are paying fewer medical claims during the pandemic, with hospitals tabling pricey elective procedures like open-heart surgery to focus on treating coronavirus cases. Even now as states reopen, doctors are seeing fewer patients as they stagger appointments and some people avoid care for fear of infection.

Companies like Anthem and UnitedHealth Group have pledged to give customers—and doctors in some cases—a share of the savings through premium credits and other discounts. But Chicago-based Health Care Service Corp., the dominant health insurer in Illinois and the sixth-largest nationwide, is hanging on to the windfall for now.

Insurers, including HCSC, acknowledge they're paying fewer claims for medical services, but they have yet to quantify the savings. Pocketing any extra cash could mean issuing big rebates next year if HCSC—which also owns Blue Cross & Blue Shield plans in Texas, Montana, Oklahoma and New Mexico—doesn't spend enough on claims to satisfy an Affordable Care Act rule. Not to mention the reputational risk, as customers wonder why other companies are offering discounts but HCSC isn't.

"My guess is that the places where you see" insurers proactively returning revenues to customers are "where consumers are making the most noise," says Amanda Starc, an associate professor at Northwestern University's Kellogg School of Management. "It might be that the Anthems of the world face more pressure from their consumers relative to an HCSC."

While HCSC has launched initiatives to support consumers, including covering certain patients' out-of-pocket costs for treatment related to COVID-19, the insurer has not publicly announced relief in the form of premium credits or rebates.

"We are making a long-term commitment, like we always have, to support our customers," HCSC spokesman Greg Thompson says in an email. "These are extraordinary times and we are actively working with them on a one-to-one basis to identify solutions that will provide short-term relief."

Thompson says stay-at-home orders and widespread cancellations of elective procedures came too late to affect the company's first-quarter financial results. However, HCSC's publicly traded rivals cited declines in claims as a factor that contributed to higher-than-expected first-quarter profits.

FEELING PRESSURE

An insurer like Anthem could be feeling more pressure to dole out excess revenues than privately held HCSC since "publicly traded companies face significant headline risks when they report second-quarter results in July and August," Morningstar analyst Julie Utterback says.

Their earnings reports are due out just before health insurers start issuing medical-loss ratio rebates, the mechanism that limits profits by requiring insurers to spend a certain percentage of premium dollars on medical care and quality improvement. This year's rebates are based on financial data from before COVID-19.

UnitedHealth Group, the parent of the nation's largest insurer, in May said it would provide customers with $1.5 billion in financial support, including premium credits ranging from 5 to 20 percent this month for its fully insured customers. Anthem followed suit in June, saying it would provide support worth $2.5 billion, including a premium credit in July ranging from 10 to 15 percent for fully insured employer customers and members enrolled in select individual plans.

SMALLER INSURERS

But it's not just publicly traded companies. Smaller insurers are also offering premium relief and rebates. Blue Cross & Blue Shield of Michigan is returning around $100 million in medical, dental and vision premiums to some fully insured customers. Premera Blue Cross is giving some customers up to $25 million in premium relief and accelerating nearly $40 million in rebates already owed under Obamacare rules.

HCSC isn't the only holdout. While Humana and Cigna have launched other initiatives to support customers, like waiving out-of-pocket costs for COVID-19 testing, they have not announced health care premium credits or rebates.

"The great irony is that insurance companies are really risk averse, so you could easily see an insurance company who's seeing that volumes and utilization in second quarter are down, but concerned about what's going to happen for the rest of year and wanting to keep that (cash) for a rainy day," Starc says. "And then if the (medical-loss ratio) kicks in, the (medical-loss ratio) kicks in."

With so much uncertainty, including how quickly patient volumes will bounce back when COVID-19 ebbs, insurers that aren't getting pressure from customers or regulators likely will wait to return excess revenues.

The hospital industry says patient volumes this month are still far below pre-pandemic levels. And according to an April analysis from the Illinois Health & Hospital Association, inpatient revenues were down 30 to 50 percent and outpatient revenues were down 50 to 70 percent.

It's not just the cost of medical claims that insurers are focused on amid COVID-19. As millions of Americans lose their jobs—and their employer-provided health insurance—insurers like HCSC could see membership drop, hurting revenue.

In fact, enrollment declined slightly in HCSC's group health business as a result of worker layoffs, Thompson says, noting that there could be a "recession-related shift to different types of plans," like Medicaid.

If customers don't press insurers like HCSC to share the wealth, regulators might. Some state insurance commissioners have asked health insurers to consider offering rate reductions and other discounts. "This is one where I think insurers have a real moral responsibility," Mike Kreidler, the insurance commissioner for Washington state, told the Wall Street Journal earlier this month.

In an emailed statement, Illinois Department of Insurance Director Robert Muriel notes that state law doesn't require premium relief, but said the department "is in communication with health insurance companies about how to assist Illinois consumers during the ongoing COVID-19 pandemic."