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The COVID-19 pandemic outbreak caused drastic fluctuations in medical care as portions of the country and economy shut down, leading to postponements, deferrals and cancellations of procedures and services, creating some uncertainty for providers of accident and health insurance and related coverages, industry sources say.
Moving into 2021, uncertainties over the speed of economic recovery and the success of vaccine rollouts could add to the market’s challenges.
“Utilization declined most substantially in those business lines where routine services were prohibited by local regulation — the dental business in Q2 being the primary example where for most practices non-emergency care was prohibited for the entire month of April,” said Tim Zawacki, Charlottesville, Virginia-based lead insurance industry analyst for S&P Global Market Intelligence.
Accident and health policies, which are often available through employers, vary in what they cover but typically are designed to cover medical and injury-related expenses not covered by a conventional health plan, including medical deductibles.
With fewer people seeking medical care due to quarantine and social distancing restrictions, claims volume dropped off as much as 40%, according to Tim Nimmer, global chief actuary for Aon PLC in Denver.
“There was a period, mostly in the March-April-May time frame, in which various local economies were shut down, with dentist offices and optometrist offices closed. That certainly had an impact on depressing claim activity,” said Rich Fuerstenberg, senior partner at Mercer LLC in New York.
“We did see a downtick in claims,” said Ken Gumbiner, head of accident and health sales at Swiss Re Corporate Solutions in Fort Wayne, Indiana, which supplies medical stop loss coverage to commercial customers. “Since we deal with claims above a certain threshold, the vast majority of the downturn was at the employer level.”
Medical stop loss coverage, which covers self-insured employers for catastrophic losses, attaches at different points for each employer, whether it be $50,000 or into the low-to-mid six figures, Mr. Gumbiner said. Therefore, the decline in maintenance utilization of medical services, such as dental checkups and inexpensive office tests and procedures, generally fell below that threshold, or attachment point.
Insurers, however, did not see a big reduction in premiums as a result of “numerous rounds of stimulus and different regulations that were put in place,” according to Doniella Pliss, director at A.M. Best Co. Inc. in Oldwick, New Jersey. “The premiums didn’t suffer, so what health insurers ended up with was a stable top line and significantly lower claims.”
The pandemic did leave employers with some unforeseen situations.
Disability was one area in which employers had to come up with novel solutions, Mr. Fuerstenberg said.
“From a disability perspective, if you just need to quarantine, that normally doesn’t qualify you for short-term disability,” he said, adding short-term disability applies if you have an illness that prevents you from working.
Employers responded to the situation in different ways, with some using some combination of sick leave, vacation or “emergency leave,” Mr. Fuerstenberg said. Some employers expanded short-term disability plans to include the new circumstance while other employers set up separate lead policies to deal with COVID-19 absence.
As the reopening of the economy progresses and workers again begin to travel, employers may have to review coverage such as business travel accident and sickness, and leisure travel coverage, said James Walloga, New York-based executive vice president, Chubb Accident and Health. “With the return to business travel, corporate leaders are asking questions about their travel exposures, such as: who will travel, to where and whether their current travel risk policies meet their needs,” he said.
As demand for travel insurance increases, it could be viewed by some travelers as a “need to have” insurance rather than a “nice to have,” Mr. Walloga said.
Employers are also looking at travel coverages in light of the changes in working environments, with many workers moving to remote working at home or closer to where they live. “With all of these new workplace scenarios, employers are evaluating accident and sickness coverages that respond to these emerging risk and benefit needs,” he said.
Health care utilization began to return to more normal levels in the third and fourth quarters of 2020, sources said, and the industry is trying to forecast what 2021 might look like after such an unusual 2020.
“We expect first-quarter 2020 to look a lot like fourth-quarter 2020 from everything we’ve seen so far,” Aon’s Mr.
Swiss Re Corporate Solutions’ Mr. Gumbiner said that health care claims have seen a return to pre-pandemic levels but have not exceeded those levels.
“Our outlook assumes utilization returns to normal levels on an industrywide basis in 2021 and, in some cases, exceeds the longer-term trend as patients seek deferred care, but this is obviously subject to change depending upon how the pandemic plays out,” S&P’s Mr. Zawacki said.
Just as the pandemic has accelerated digital transformation in the property/casualty insurance world, the outbreak has also hastened the development of telemedicine, sources say.