The COVID-19 pandemic drove down healthcare spending and usage to historic levels in 2020 as providers deferred routine and elective procedures and patients put off nonemergency care to mitigate risk of infection and spread of the novel coronavirus.1,2 Overall healthcare spending last year likely slid for the first time since CMS started recording it in 1960, while per-member-per-month gross margins for Medicare Advantage plans last year were 24% higher than in 2019 and 31% higher than in 2018.1,2
The financial effects of the pandemic also prompted an overall 2-percentage-point drop in medical loss ratios in the MA market, putting some plans below the 85% threshold mandated by law, although the market may still eclipse the threshold when total-revenue deductions are calculated. Penalties, including possible termination, could be levied against MA plans that remain below the 85% requirement over multiple years.
MA plans that come up short of the required 85% are bound by law to provide rebates to the federal government. Insurers can offset this risk by offering additional options to members such as dental, hearing and vision benefits and memberships to wellness centers.1 Plans have also offered members increased telehealth benefits, home-based care and home modifications, coverage for over-the-counter treatments, and transportation and meal services3 to help close the gap.
The pandemic’s impact on the market could last through this year,2 and a proactive approach to compliance is always best. Adjusting benefits offerings can enable plans to do both while meeting members’ needs through the current health emergency and beyond.
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References
- McDermott, D., et al. Health Insurer Financial Performance in 2020. Kaiser Family Foundation. May 3, 2021. https://www.kff.org/private-insurance/issue-brief/health-insurer-financial-performance-in-2020/
- Miller, G., et al. COVID-19 Shocks the US Health Sector: A Review of Early Economic Impacts. Health Affairs. Dec. 16, 2020. https://www.healthaffairs.org/do/10.1377/hblog20201214.543463/full/
- Young, J., et al. MA Enrollees Can Access COVID-19 Supplemental Benefits in 2021. Avalere. Oct. 19, 2020. https://avalere.com/insights/ma-enrollees-can-access-covid-19-supplemental-benefits-in-2021
