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Health Insurers Prosper As COVID-19 Deflates Demand For Elective Treatments

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3 years ago

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As doctors and consumers are forced to put most nonemergency procedures on hold, many health insurers foresee strong profits.

So why is the industry looking to Congress for help?

Insurers say that while that falloff in claims for non-COVID care is offsetting for now many insurers’ costs associated with the pandemic, the future is far more fraught.

Costs could remain modest or quickly outstrip savings. A recession could drive revenue down. Or the coronavirus could resurge next winter and spike treatment expenses.

All that uncertainty for the companies could trigger far higher premiums for consumers, if insurers hedge their bets. Then again, the current savings insurers are seeing — along with cautions from state regulators about pushing cost-sensitive customers away during an economic downturn — might result in minimal premium increases.

“Insurers are nervous, to be sure,” said Mike Kreidler, Washington state’s insurance commissioner. “But so far they are telling me they are in good shape. Coronavirus claims have not been that high — yet.”

Backing that assessment was a report out last week by credit rating agency Moody’s, which looked at a range of pandemic scenarios — from mild to severe — and concluded “U.S. health insurers will nonetheless remain profitable under the most likely scenarios.”

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. Other insurers, including Centene, Anthem, Humana and Cigna, are scheduled to release earnings reports this week.

If these results are repeated across the insurance industry, there will be pressure on insurers to hold down rate increases for next year and do more for policyholders, such as constrain the growth in deductibles and other out-of-pocket costs, said consumer advocates, regulators and policy experts.

“The last thing we need is insurers pricing their coverage unnecessarily high at a time like this,” said Peter Lee, executive director of Covered California, the health insurance marketplace in that state for people who buy their own coverage because they don’t get it through their job.

That prediction comes as tens of millions of Americans have lost their jobs — and often their health insurance.

Those thrown out of work may be able to stay on employer coverage through a federal law called COBRA, but it’s expensive and workers have to foot the bill. Insurers and employers have asked Congress for relief legislation to fully cover COBRA costs.

Losing a job is also a qualifying event to enroll in an Affordable Care Act plan — and, again, the industry has asked lawmakers to temporarily boost subsidies to help enrollees pay their premiums. Some states that run their own ACA marketplaces have reopened enrollment to help the uninsured get coverage.

The industry also wants Congress to authorize temporary financial support to help cover insurers that face “extraordinary, unplanned costs in 2020 and 2021,” according to a letter sent to lawmakers from America’s Health Insurance Plans and the Blue Cross Blue Shield Association.

To help, some states are giving insurers more time this year to submit their planned premium rates for 2021 — based on their expected costs — hoping things may be clearer by summer. California, for instance, is giving insurers until July to draw up their estimates.

One fear is that insurance actuaries, when faced with an unknown risk like the coronavirus, will price higher than needed, said Lee.

Setting premiums for next year is a balancing act. Insurers that calculate incorrectly and go too low will lose profits and may have to dig into their cash reserves to pay claims. If they set rates too high, they may run afoul of a provision in the ACA that requires insurers to issue rebates to policyholders if they don’t spend at least 80% of revenue on medical care.

And they don’t estimate well even in normal years. Early data for 2019 coverage shows insurers may owe a record amount in rebates, which will be paid out this year.

Insurers are not talking about next year’s premiums.

“We do not yet know the full scope, severity or duration of this outbreak. So we cannot know the ultimate cost of our members’ medical treatment or how long the postponement of non-urgent care will continue,” said Justine Handelman, senior vice president at the Blue Cross Blue Shield Association.

Early estimates, including a scary one from Covered California issued in late March, warned that costs associated with the coronavirus could drive premiums up 40% next year without federal help, based on initial models of the number of Americans who might fall seriously ill.

That report, though, did not take into account the effect of the sharp decline in elective care.

Thirty-one states have barred most elective surgeries, part of the effort by governors to promote social distancing to flatten the curve of the epidemic and to help prevent hospitals from being overwhelmed.

“The good news since we published that report is that it looks like efforts to flatten the curve are taking effect,” said Lee, so costs are more likely to be in the median rather than high end of the range.

The cost to insurers “all depends on the severity” of the continuing pandemic, said Dean Ungar, a vice president and senior credit officer at Moody’s. “On the lower side, the industry will do quite well, and also even in a more median scenario, especially when you factor in the offsetting benefit of delayed procedures.”

Moody’s estimates that deferred elective procedures may account for as much as 20% to 40% savings on medical costs per month for many insurers as long as elective procedures are barred or patients are unwilling to seek nonemergency care.

Even so, “I don’t think the insurance industry as a whole has any intention of making money off this,” Ungar said. “There will be rebates or other things to help. Partly that’s the right thing to do and partly it’s good business.”

Former Cigna executive turned industry critic Wendell Potter disagreed. He tweeted earlier this month that UnitedHealth spent $1.7 billion during the first quarter to buy back its own stock — a move that helps the company. “In other words, they’re thriving during a pandemic,” Potter tweeted. Instead, he said, the insurer should plow that money into premium reductions or other help for policyholders.

For its part, UnitedHealth said it has waived patient cost sharing for COVID care — as have most other insurers — as well as accelerated payments for what it owes to doctors, and is helping provide loans to some clinics.

Some physician groups fear they are being left out, saying some of the savings seen by insurers and self-insured employers should be directed to those struggling after seeing their practices dry up as people avoid medical care or governors bar elective procedures.

“It’s a huge hit,” said Tom Banning, CEO and executive vice president of the Texas Academy of Family Physicians.

Lee agreed, warning that struggling front-line physicians, and especially family and primary care doctors, will need financial help.

“A bad outcome of all this will be if thousands of providers can’t make it financially and their practices get bought up by hospitals or private entities — creating more consolidation in health care, which is already driving costs up,” said Lee. “Lawmakers should be thinking about helping primary providers out.”

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By: Julie Appleby, Kaiser Health News and Steven Findlay
Title: Health Insurers Prosper As COVID-19 Deflates Demand For Elective Treatments
Sourced From: khn.org/news/health-insurers-prosper-as-covid-19-deflates-demand-for-elective-treatments/
Published Date: Thu, 30 Apr 2020 09:00:07 +0000

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Retirement Planning

Ends-of-the-World Every Year Since 1970

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3 years ago

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August 14, 2020

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There always has been and always will be a reason not to invest or not to stay invested. This is all the mainstream media reports to us. Below you will find a list of some of the worst global events each year since 1970. I have some commentary to follow.

1970: War: US troops invade Cambodia.
1971: Civil Unrest: Anti-war militants march on Washington.
1972: Political: Start of Watergate Scandal.
1973: Economic: OPEC raises oil prices in response to US involvement abroad.
1974: Political: Nixon resigns as President of the United States.
1975: Political: Multiple assassination attempts on President Ford.
1976: World: Ebola virus.
1977: Political: Government shutdowns.
1978: Market: U.S. Dollar plunges to record low against many European currencies.
1979: World: Iranian militants seize the U.S. embassy in Teheran and hold hostages.
1980: Economic: Inflation spiked to a high of 14.76%.
1981: Political: President Reagan assassination attempt.
1982: Economic: Recession continues in the U.S. with nationwide unemployment of 10.8%.
1983: Economic: Unemployment in the U.S. reaches 12 million.
1984: Economic: 70 U.S. banks fail during the year.
1985: World: Multiple airplane hijackings around the world.
1986: World: Chernobyl Nuclear Power Station explodes.
1987: Market: DOW drops by 22.6% on October 22.
1988: Environment: Awareness of global warming and the greenhouse effect grows.
1989: Environment: Exxon Valdez dumps 11 million gallons of crude oil into Prince William Sound.
1990: World: Persian Gulf War starts.
1991: World: Mass shooting in Killeen, TX.
1992: Human Rights: Los Angeles riots following the death of Rodney King.
1993: Terrorism: World Trade Center bombing.
1994: World: Mass genocide in Rwanda.
1995: Terrorism: Oklahoma City bombing.
1996: Terrorism: Olympic Park bombing.
1997: World: Bird flu.
1998: World: Multiple U.S. embassy bombings.
1999: World: Columbine shooting.
2000: Economic: Start of the Dotcom Market Crash.
2001: Terrorism: Terrorist Attacks in NYC, DC & PA.
2002: Economic: Nasdaq bottomed after a 76.81% drop.
2003: World: The U.S. invades Iraq.
2004: World: The U.S. launches an attack on Falluja.
2005: World: Hurricane Katrina
2006: World: Bird flu.
2007: Economic: Start of the Great Recession.
2008: Economic: Great Recession continues.
2009: Economic: S&P bottomed after a 56.8% drop.
2010: Market: Flash crash.
2011: Market: Occupy Wall Street and S&P downgrades U.S. Debt.
2012: Political: Fiscal cliff.
2013: Political: Taper tantrum.
2014: World: Ebola virus.
2015: World: Multiple mass shootings.
2016: Political: Divided U.S. Presidential election.
2017: World: North Korea testing nuclear weapons.
2018: Economic: U.S. & China trade war.
2019: Economic: Student loan debt reaches an all-time high of $1.4 trillion.
2020: World: COVID-19.

While many of these events were undoubtedly terrible (and there are certainly others not named here that were worse), most of these were broadcast as end-of-the-world events for the stock market. Despite that attention, it is worth noting that these were, for the most part, one-time events. In other words, most faded into the newspapers of history. We moved on.

Obviously, some caused monumental shifts in the way the world works. Just think about how much air travel continues to be impacted by the events of 9/11. But, outside of the resulting inconveniences (if we want to call safety protocols inconveniences) associated with air travel, flying is safer than ever before.

Take a look at just about any of the events and you will find there are many that people will hardly remember. My point here isn’t that these events are to be ignored or that they were easy to stomach at the time, but that they have become a distant memory.

I want to also make the point that we should expect these types of negative events. As investors, we know these types of crises, economic catastrophes, and global phenomena are going to happen.

But in almost all cases, here is what we can say in the next breath – this too shall pass.

Will there be legal, humanitarian, economic, or some other aid required as a result of these events? Almost certainly the answer is yes, but that doesn’t mean it they won’t eventually fade into history.

Lastly, what’s worth noting is how the market has performed over these last 50 years despite the continual advertisements of the world crashing down around us. On January 2, 1970, the Dow Jones stood at 809 and the S&P at 90 -> those are not typos. These same indexes have grown (not including dividends) to 26,387 and 3,232 respectively. Amazing, no?

Perhaps what gets overlooked more than anything else is what separates the above one-time negative events from the positive stories that go largely ignored over our lifetimes. And that is a story worth telling. See the companion post below:

Unheralded Positive Events Every Year Since 1970

Stay the Course,
Ashby

Retirement Field Guide Mission:

“To help 10 million people make better retirement decisions.”

If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.

This post is not advice. Please see additional disclaimers.

The post Ends-of-the-World Every Year Since 1970 appeared first on Retirement Field Guide.

—————–

By: Ashby Daniels, CFP®
Title: Ends-of-the-World Every Year Since 1970
Sourced From: retirementfieldguide.com/ends-of-the-world-every-year-since-1970/?utm_source=rss&utm_medium=rss&utm_campaign=ends-of-the-world-every-year-since-1970
Published Date: Tue, 04 Aug 2020 13:26:19 +0000

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Wildfire prone property insurance bill in California due for hearing

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3 years ago

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August 14, 2020

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The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.

The bill is expected to be heard in upcoming weeks as opposing sites prepare for major battle.

A new California bill, the outcomes of which will have a lot to say about coverage for wildfire prone property in the state, will soon be headed for hearing. The hearing is expected to be a heated one as strong opposing opinions have the opportunity to be voiced.

Opponents of this bill are calling it a direct attack on consumer protections in insurance.

That said, proponents of the bill claim it is the best method for making coverage available to wildfire prone property in California. The bill in question is Assembly Bill 2167. It was written by Assemblyperson Tom Daly (D-Anaheim). If it passes,it will create the Insurance Market Action Plan (IMAP) program. The IMAP program is meant to protect residential properties.

So far, AB 2167 has progressed quickly, when taking into consideration that a chunk of the legislature has been considerably restricted by pandemic crisis precautions. It was first presented in early June and backers have been saying that it was brought forward in good timing and that it has all the momentum it needs to be passed.

That said, AB 2167 has not been without opposition. In fact, it has faced considerable opposition, having been called an attack on Proposition 103, insurance consumer protection law. California Insurance Commissioner Ricardo Lara lobbed that argument at it, calling it an “insurance industry wish list, with nothing to help consumers,” and Consumer Watchdog, whose founder, Harvey Rosenfeld, was the original author of Proposition 103.

The insurance industry strongly supports the bill, saying it will help wildfire prone property coverage.

Insurance organizations such as the American Property Casualty Insurance Association and the Personal Insurance Federation both support AB 2167. The bill also has the support of the California Association of Counties (CSAC), as well as Fire Safe Councils of California, and the CalFIRE union.

The Consumer Federation of America, another watchdog organization, has predicted that if AB 2167 passes, it will cause 40 percent increases in insurance rates. On the other hand, insurance groups claim that the bill offers owners of wildfire prone property a greater opportunity for choice and competition among insurance companies based on coverage and premiums while avoiding the limitations and high costs associated with FAIR Plan coverage.

The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.

—————–

By: Marc
Title: Wildfire prone property insurance bill in California due for hearing
Sourced From: www.liveinsurancenews.com/wildfire-prone-property-insurance-bill-in-california-due-for-hearing/8549884/
Published Date: Fri, 14 Aug 2020 09:00:14 +0000

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Is this the last hurrah for bonds?

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3 years ago

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August 13, 2020

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Recently, I have written quite a bit about the long-term return expectations for investing in bonds. See here, here, here and here.

Spoiler alert: I don’t think it’s good.

But long-term bonds this year have been quite an amazing story as the COVID pandemic has caused the Fed to take historically monumental actions. As a result, we’ve watched long-term Treasuries tear the roof off the market. For instance, a 20+ Year Treasury Bond ETF (name withheld for compliance purposes) is up more than 31% YTD as of July 31st.

That is insane!

But there is a good reason for this increase shown below.

The red circle shows a decrease in the 30-year Treasury rate of almost 40% over a span of six months. That’s practically unprecedented with only two periods (2008 and 1981-1982) having similar declines over such short periods.

But this begs the question: Is this the last hurrah for bonds as a driver of any meaningful return? Below is the 30-Year Treasury rate over the last 40+ years.

For what it’s worth, people have been forecasting the end of the bond bull market since 2012 (maybe even earlier) and yet it has continued despite those predictions. But at some point, the bond party will come to an end.

The Fed has been clear that they are going to keep rates stable until at least 2022 which means this may not change for a little while longer. Or in the near term, I could even see the high returns continuing if we experience pandemic economic shutdown round two.

But, I can’t see a world where this is the case for much longer than that – most importantly over the span of a 30-year retirement.

The official end of the bond bull market depends on a recovery from the pandemic economy as well as a few other factors causing rates to rise. But when they do, it seems likely to me that this may be the last great hurrah for bonds for quite some time.

The question is when to get off that train and that undoubtedly requires a personal answer.

Stay the Course,
Ashby

Retirement Field Guide Mission:

“To help 10 million people make better retirement decisions.”

If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.

This post is not advice. Please see additional disclaimers.

The post Is this the last hurrah for bonds? appeared first on Retirement Field Guide.

—————–

By: Ashby Daniels, CFP®
Title: Is this the last hurrah for bonds?
Sourced From: retirementfieldguide.com/is-this-the-last-hurrah-for-bonds/?utm_source=rss&utm_medium=rss&utm_campaign=is-this-the-last-hurrah-for-bonds
Published Date: Wed, 12 Aug 2020 13:47:16 +0000

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