The premium credits Priority Health and Blue Cross Blue Shield of Michigan are providing small employers this summer stem from lower medical claims after the onset of the COVID-19 pandemic.
That’s because many people put off getting medical care during the public health crisis and hospitals were unable to perform non-elective procedures, surgeries and diagnostic tests.
For both health insurers, opting to provide premium credits to employers was a preferred response to a one-time event, rather than to temporarily lower their rates and then raise them back up again at a later date.
“It prevents those unreasonable rate swings, and that’s really the goal: … just try to keep the market stable. We don’t want to have rates going up and down dramatically over temporary fluctuations,” said Chase Osbourne, chief underwriter at Grand Rapids-based Priority Health. “Our goal is to get the funds sort of handed back faster via premium credits to our small groups and our large groups.”
Osbourne and his Blue Cross Blue Shield of Michigan counterpart, Kirk Roy, spoke during a recent webinar hosted by Advantage Benefits Group Inc. in Grand Rapids.
As a result of the lower medical claims trend during the pandemic, Priority Health is providing a 15-percent credit for June and July premium bills for small businesses with two to 50 employees, and for individual policyholders enrolled in the MyPriority health plan.
Large group and fully funded employers will receive a premium credit in the fourth quarter, once Priority Health determines the amount of excess revenue available in the health plans beyond the normal margin and administrative costs. Large group employers are rated on their claims experience, “so we’re going to continue to evaluate really what that total cost looks like,” Osbourne said.
“We want to make sure we are giving credit where credit is due, so the plan right now is to roll things out starting in the fourth quarter with renewals and just kind of take it one month at a time. We want to make sure we give that credit back to groups due to the displacement of cost and care in 2020,” he said.
Blue Cross Blue Shield this summer is giving fully insured employers in the small group market who have 50 or fewer employees a 30-percent premium credit in July.
Looking ahead to 2021, Blue Cross Blue Shield has proposed small increases for small group policies: a statewide average of 0.9 percent for its PPO plans, and 1.9 percent for HMOs.
Priority Health recently filed a request with state regulators for a statewide 2.56-percent average rate increase in 2021 for the small group market.
For larger groups whose premiums are set based on their claims experience, Priority Health intends to make actuarial adjustments for premium credits later this year, and then “set rates (for 2021) based on what we think the future costs are going to be,” Osbourne said.
“The goal is always about looking at what the future cost is going to be and we use the history to help us make those decisions, but when we do see large, temporary things that pop up – and COVID is a great example – it’s appropriate for us to make an adjustment to kind of smooth things out for them.”
At Blue Cross Blue Shield, “we’ll sort of make a one-time adjustment” with a “combination of usual trends” to set rates for large group policy renewals, Roy said.
“What we’re not going to do is, ‘Oh, we’re scared because there’s uncertainty so we’re going to load up the rates,’” Roy said. “We’re going to be pricing fairly aggressively.”
The inability to do elective procedures and surgeries until recently generated significant operating losses at hospitals.
Roy expects that some hospitals may seek to alter reimbursement agreements and raise charges for medical care and what health insurers pay. Blue Cross Blue Shield will push back at those requests.
“Our contracts don’t allow for that,” he said. “I think there will be some negotiations, some pushback on that, but on behalf of our customers, we plan to hold firm with that, and anything that we would do would feel like a one-time credit of relief (for care providers), rather than build future unit prices that would disadvantage us as a business or all of our customers.”
One uncertainty for health insurers with physician offices reopening and hospitals resuming elective procedures and surgeries is whether they’ll soon see higher medical claims from pent-up demand, and what happens after any immediate spike.
Blue Cross Blue Shield experienced a “steep dropoff” in claims for March that started “sort of bottoming out” in mid-April before coming back up in May, Roy said. Some hospitals reported June was off to a strong start, and others even said their inpatient units were full, he said.
“So, this question around how much of this deferred care is just a rush for people to get stuff in before the second wave, but then they’ll still be fearful of going for routine care — that’s the big unanswered question right now,” Roy said. “Do we pop back up in the summer while things are good and then does that pent-up demand keep going or does it stay down?”