The full impact of COVID-19 on future health insurance premiums has yet to be seen, but at least in New York for 2021, state regulators approved a 4.2% average rate increase for the small group market, the second lowest in a decade.
That is a break considering insurers requested an average rate increase of 11.4% in the small group market, which covers employers with 1 to 100 employees.
Still 4.2% is an average across the multiple carriers and plans throughout New York State with some plans seeing higher increases on top of increases small businesses have already endured over the years, say experts.
"The concern is, on the surface, the increases are incremental, but that’s on top of prior year increases," says Gregg Pajak, president and founder of WizdomOne Group Family of Companies, an Islandia-based risk and investment management firm.
He said the full effect of COVID-19 on premiums will probably not be seen for a year or two because there is still uncertainty on costs including whether the pandemic will worsen again and how costs will be impacted by people putting off health care and elective surgeries this year and pushing them into next year.
Insurance companies had to submit their expected 2021 rate requests for the small group market to the state for approval in June and while they did reflect some pandemic costs, the full impact of COVID-19 probably won’t be reflected until they submit rate requests next year, says James Eckardt, president of Peak Advisors Inc., a Holtsville-based health insurance broker. See tinyurl.com/y46odtbh for approved rates.
But for 2021, approved rates "were lower than expected," considering what insurers requested, he said. It was better than last year’s 7.9% approved increase and that is why Eckardt expected it to be higher.
For larger firms with more than 100 employees, where rates are individually set with carriers, there is more uncertainty for 2021.
A Piper Sandler survey of benefits managers at large firms cited 2021 rate increase requests from major insurers ranging from 3% to 4.4%.
But "it’s still somewhat of an unknown," considering another survey Piper Sandler conducted found about a quarter of people putting off some level of care until after the pandemic’s over, says Sarah James, a senior research analyst at the firm.
That makes it hard to pin down costs.
PwC’s Health Research Institute in a recent report projects medical costs in 2021 could rise anywhere from 4% to 10% depending upon different scenarios impacted by COVID-19. The projected increase for 2020 was 6%.
Medical costs are one of the key factors impacting premiums when insurers set rates on health plans.
"The COVID pandemic has made it very difficult to project what the medical cost trend is going to be in this coming year," says Ben Isgur, managing director of PwC’s Health Research Institute. "There’s more variables then we normally have."
The report lays out low, medium and high-spending scenarios that fluctuate from 4% to 10% with the higher scenario reflecting an increase in spending due to the return of care patients previously delayed due to COVID. Also driving up costs could be new specialty drugs and costs related to employee mental health benefits utilization heightened by COVID-19, says Isgur.
Bringing down costs could be such factors as an increased number of patients utilizing telehealth services versus seeking in-person care.
Still "from an employer point of view health care costs are always going up," says Isgur. Christina Panetta, owner of Panetta Physical Therapy, which has locations in Bay Shore, Ronkonkoma and Roslyn and about 33 employees, says her company’s health care costs have increased over the years often in double digits.
She said the lower than expected state approved 2021 increases helps, but costs are still high, amounting to six figures annually.
Panetta offers three different levels of Oxford plans with premiums ranging from $850 a month per employee to $1,200 a month depending on the plan with the firm picking up 60% of costs.
Panetta, a client of Peak Advisors, tries to give employees options considering employees range in age, she says. She has stayed away from high-deductible plans, but that’s an option some companies are choosing, says Pajak.
A high-deductible plan, which generally offers lower premiums, isn’t necessarily bad if the employer sets money aside for the employee in a reimbursement vehicle like a Health Savings account, he says. Eckardt says many employers, to control costs, are opting to participate in lean or narrow provider networks, which have lower premiums in exchange for fewer participating doctors, but benefits remain the same.
"They could save 15% with the same exact benefits moving to a smaller network with the same carrier," he says.
Is your doctor worth paying extra for health insurance? Well, 35% of individuals with employer-sponsored health insurance said they would choose a narrow network plan with a more limited network of doctors and hospitals than their current plan next year to avoid higher premiums, according to a survey by PwC’s Health Research Institute.