Coronavirus is a historic health crisis. So why isn’t it increasing Colorado health insurance prices?

Amid a historic public health crisis, something curious has happened with health insurance prices: Nothing.

When state officials this month unveiled the approved rates for next year’s health insurance plans, they announced the smallest change in years. Average prices for plans in the individual market — where people shop for insurance if they don’t get coverage through an employer — are set to decline by 1.4%. Average prices in the small-group market — where small employers buy plans for their workers — are set to rise by 3.8%.

Given that prices in both of these markets were increasing annually by double-digit percentages not long ago, the non-news of next year’s rates comes as welcome news for consumers. But it also raises a question. Why hasn’t the coronavirus pandemic — and all the costly medical care that can go along with it — led to higher insurance prices?

The answer can be found in dozens of pages of regulatory filings that insurance companies submitted to the state when seeking approval for next year’s rates. The upshot is that health insurers seem to be as unsure as the rest of us about what next year will look like.

Some companies project a modest increase in the amount of medical care they will have to cover due to coronavirus — on the order of 1% or so. Others think people will continue to avoid seeking treatment for non-urgent conditions, resulting in lower expenses. And some companies openly say they don’t know and don’t want to guess.

“It kind of nets out once you look at the savings that came from this year and you try to forecast that forward,” said Michael Conway, Colorado’s insurance commissioner.

Nationwide trend

What’s happening with health insurance prices in Colorado matches what’s happening nationwide. When the Kaiser Family Foundation, a nonpartisan health-research organization, looked at filings across the country, it found an average 1.1% increase in prices for individual market plans next year. Digging deeper, the organization found that COVID-19 had an average 0% impact on next year’s prices.

“The term ‘uncertainty’ came up a lot,” said Nisha Kurani, a senior policy analyst at the Kaiser Family Foundation.

Part of that uncertainty is trying to figure out how much medical care unrelated to coronavirus people are going to need next year. When the pandemic hit this spring, hospital and doctor’s office visits for elective and non-urgent medical care plummeted. Even people potentially experiencing heart attacks stopped showing up at hospitals — possibly leading to an increase in cardiac arrests at home.

Michael Kleinrock, a research director at the health care analytics company IQVIA, said hospital patient volume nationwide has rebounded after steep drops earlier this year. Overall for the year, the system is seeing about 20% less utilization than expected pre-pandemic. Patient volume is close to normal but not enough to make up for all those missed visits earlier in the year.

“The system appears to be learning how to walk and chew gum, learning how to manage COVID in this environment and still deliver necessary health care for other people. Which is positive,” he said. “But there’s still that lingering issue of the where-did-they-go people.”

Colorado hospitals have also seen a rebound in patient visits, but not enough to make up for earlier losses. Julie Lonborg, a spokeswoman for the Colorado Hospital Association, said inpatient discharges are down 12% for the year and emergency room visits are down around 25%.

Hospitals expect that lower volume to persist through the end of the year and much of next year, far longer than what the hospital association thought when the pandemic first hit the state.

“We all thought at the time, ‘Oh gosh, surely by October life will be a little back toward normal,’” she said. “I think we all recognize now that that is not the case and will continue not to be the case for some time.”

The certainty of “uncertainty”

But there are also other factors that make it complicated to project how coronavirus will impact medical costs next year. How much will the virus spread? Will there be a safe and effective vaccine and when will it be ready? Will new treatments be approved and how much will they cost? Will the election mean a change in the White House and a different approach to fighting the virus? Will pandemic-related job losses cause more people to buy coverage in the individual market — or drop coverage altogether?

“We note,” the Denver Health Medical Plan wrote in a filing with the state, “that there is substantial uncertainty regarding the impact of the COVID19 pandemic on premium rate development, including whether the pandemic will increase or decrease costs in 2021.”

Some of the information that companies provided to the state is redacted to protect business confidentiality, and it is possible that the insurers were more candid with their assessments of the pandemic in those sections. But, just like the Kaiser Family Foundation saw nationally, the word “uncertainty” keeps popping up in insurers’ public filings. 

“Due to the limited information available on the pandemic,” the insurance company Oscar wrote in an actuarial memo filed with the state, “any analysis is subject to a substantially greater than usual level of uncertainty.”

Regulatory limitations

There’s also one other coronavirus-related reason that rates will stay relatively flat next year, and it involves regulatory muscle.

When insurers filed their preliminary rates earlier this summer, they asked the state to approve an average 2.2% increase for the individual market and 5.7% increase for the small group market. But the state Division of Insurance, led by Conway, knocked those rates back before final approval.

When coming up with proposed rates, insurers have to make calculated guesses on how much certain components of health care costs will increase or decrease in the coming year. For instance, insurers will estimate how much rising prices or how much frequency of health care utilization will impact their costs. This is called “trend” in regulatory parlance. 

One reason regulators knocked next year’s proposed rates down is that the state imposed a cap on how much of an increase insurers could predict for health care utilization — setting the amount at no more than 1%. Conway said that was done because the state last year approved projected utilization increases that were way higher than what insurers have actually seen, because of the pandemic. That meant rates were likely set higher than ultimately needed last year, which could lead insurers to having to refund money to customers in the coming years.

“It just really hadn’t come to fruition, the increase we had approved last year,” Conway said. “So we didn’t think it would be appropriate to grant a typical utilization trend.”

Amanda Massey, the executive director of the Colorado Association of Health Plans, an insurance industry trade group, said the Division of Insurance also limited how other coronavirus-related costs could be factored into the 2021 rates. She said it’s important that the long-term costs of coronavirus be fully accounted for. Not doing so, she said, “could have serious consequences for health insurance premiums in the future if not accurately reflected in rates.”

BUYING INSURANCE

Open enrollment for plans in the individual and small group market starts Nov. 1 and will run through Jan. 15. You can shop for plans either on Connect for Health Colorado, the state’s insurance exchange, or through a private broker. Need more info? We put together an explainer last year for procrastinators looking to buy insurance, but its tips still work for anybody shopping for a plan without help from an employer: A procrastinator’s guide to buying health insurance in Colorado