COVID-19: The Road Ahead for Commercial Health Insurance—Q&A

COVID-19 Update

Editor’s Note: Effective health insurance coverage is key to combating COVID-19, enabling access to and payment for both testing and treatment. State regulators, health insurers, providers, employers, unions and consumers all will face daunting coverage challenges as they work to address the fallout from the COVID-19 outbreak.

Federal and state actions related to commercial health insurance are already underway—and healthcare stakeholders and state regulators will have to manage a rising tide of emerging developments and new regulations in the coming days, weeks and months. In a recent webinar, COVID-19: The Road Ahead for Commercial Health Insurance, Manatt examined the most pressing issues that lie ahead for healthcare stakeholders and state regulators—and what you can do now to prepare your organization for a radically and rapidly changing environment for commercial health insurance.

During the program, participants posed a number of questions that the presenters did not have time to address. Below are some of those questions, including some that have been combined or broadened in scope, with responses from our presenters. To view the full webinar free on demand or download a hard copy of the presentation, click here.


Q: ­Regarding covering the cost of testing, would that include testing for immunity to COVID-19?­

Generally, yes. On March 18, Congress passed the Families First Coronavirus Response Act (FFCRA), which requires coverage of COVID-19 testing and administration costs without cost-sharing. FFCRA applies to Medicare, Medicaid and private insurance. A frequently asked questions document published April 11 by the departments of Health and Human Services (HHS), Treasury, and Labor specifies that FFCRA also requires health plans and health insurance issuers to cover COVID-19 serology testing. Under the act, states have the option of providing limited Medicaid coverage to the uninsured for COVID-19 diagnostic testing, including serology testing. However, the law does not require COVID-19 serology testing to be provided free of charge to all the uninsured, who are a particularly vulnerable population.

Likewise, there are numerous state actions to require or request that health insurers cover COVID-19 testing. It appears that the language in most of these state actions is broad enough to include serology testing. However, it does not appear that any state rules have been challenged on this ground (although the health insurer association in Louisiana has announced a lawsuit against the state, in part over mandated coverage of COVID-19 testing). These state laws similarly do not extend coverage to the uninsured.

Q: With more than 30 million people filing for unemployment insurance, what is the likely impact on employer-sponsored insurance (ESI), Medicaid and Marketplace enrollment? What might Congress do to change that impact?

We could see a major shift from ESI to both Medicaid and ACA Marketplace enrollment, but much depends on what Congress does to bolster one or more of these programs. Medicaid was the nation’s major safety net program before the pandemic, with 70–75 million enrollees, and could grow to 100 million enrollees or more depending on what alternative sources of income are available to those who lose their jobs. Rapid growth in Medicaid will present difficult challenges for states suffering from lost revenues, with increasing calls for Congress to ensure that Medicaid providers get their fair share of federal relief.

ACA Marketplace enrollment was roughly 10 million before the pandemic and has already increased among those who became eligible for a special enrollment period in the Marketplace because they lost their insurance coverage. In 12 state-based Marketplaces, a special enrollment period was added for all uninsured individuals whose income exceeded Medicaid levels but remained under 400% of the federal poverty level (FPL). In November, the annual open enrollment period could see a surge of 50% or more in Marketplace enrollment—again depending on what Congress does to make Marketplace coverage more affordable and/or bolster alternative coverage, such as ESI or Medicare.

Employers provided ESI coverage to half the country (160 million employees and their families) before the pandemic, but that number could drop precipitously with unemployment reaching record levels. The Urban Institute estimated that 25 to 43 million people could lose ESI. Many states have acted to slow the loss of coverage by requiring insurers to extend grace periods, but that is only a short-term solution. A longer-term solution for preserving ESI is to subsidize COBRA coverage. COBRA allows former employees to retain their ESI coverage as long as they can afford to pay the full premium. That rules out most people even in good times, but Congress is considering whether to provide up to a 100% subsidy of COBRA coverage during the economic emergency. This would be a more expensive approach than increasing subsidies for public programs, and it would leave out those whose employer went out of business, but if COBRA were subsidized, it would likely reduce the projected growth in Medicaid and Marketplace enrollment.

Congress also could expand Medicare coverage, which currently serves more than 50 million mostly older Americans. For example, Medicare age eligibility could be lowered from 65 to 55 years old. The Trump Administration already expanded Medicare coverage to a limited degree by extending Medicare coverage to the uninsured for pandemic-related care.

In the aftermath of the pandemic, Congress is likely to take a careful look at the strengths and weaknesses of ESI and our mix of public coverage programs, with a lot of new data available on how each type of coverage performed during the pandemic.

Q: ­Likely the federal government must raise taxes to pay for the multitrillion-dollar payments ... Have you heard whether the tax deductibility of ESI may go away?

­The tax deductibility of ESI is a principal reason why employers provided coverage to half of all Americans before the pandemic. It is supported by a broad group of business, labor and health sector stakeholders, and is unlikely to be substantially changed unless and until Congress enacts a health reform proposal that provides a broadly available alternative to ESI.

Q: ­The COVID-19 pandemic may lead to more surprise out-of-network medical bills. Some states require insurers and providers to protect consumers from surprise bills. California has used the benchmark approach to address how much insurers should pay for surprise out-of-network bills, with arbitration as a backup. New York has used an arbitration approach. What has New York’s experience been with the rates paid under its system?­

COVID-19 is aggravating the long-standing issue of surprise out-of-network (OON) medical bills. As the pandemic strains the network capacity for some health insurers, the potential friction for consumers, providers and plans may escalate. As state and federal policymakers look to protect consumers, the issue that stalls many efforts is not protecting consumers from surprise OON medical bills; rather, it is how to resolve payment disputes between the insurer and the OON provider.

California was an early adopter of rules to protect consumers from surprise bills from OON providers. And California’s 2017 law is a leading example of the benchmark approach to resolving payment disputes between insurers and providers. California’s law requires fully insured plans to pay out-of-network physicians at in-network hospitals the greater of the insurer’s local average contracted rate or 125% of the Medicare reimbursement rate.

Some stakeholders such as the California Medical Society have complained that the California benchmark underpays providers, reduces network participation and impacts access to care. Other stakeholders such as America’s Health Insurance Plans have argued that networks have improved under the California law, noting that the benchmark approach is better for consumers as it lowers premiums and out-of-pocket costs. A 2019 USC-Brookings study found that California saw a reduction of approximately 17% in OON care from affected specialties under the new law.

A leading supporter of the California benchmark approach, Blue Shield of California, has said that the California law has led to an expansion of its contracted network and to increased reimbursement rates. Blue Shield cites the following results:

  • The overall number of physicians contracted increased by 5%.
  • At acute care hospital facilities, the number of in-network physicians increased by 6%.
  • The number of unique network anesthesiologists increased by nearly 7%.

Of course, these results could differ for other insurers. A more systematic study of the California law could be beneficial.

In 2014, New York was arguably the first state to adopt a comprehensive law that both limited consumer exposure to surprise OON bills and adopted an independent dispute resolution process (IDR) to resolve payment issues between insurers and providers (NY OON Law). By contrast, New York’s IDR process does not set a benchmark payment rate. Rather, the IDR chooses the last best offer of either the insurer or provider based on general criteria.

The New York Department of Financial Services published a summary of findings on how the IDR review process has worked so far. DFS found that, from its implementation in March 2015 through the end of 2018, the NY OON Law has saved consumers over $4 million. Another report from Yale concluded that the NY OON Law reduced OON billing in New York by 34% and lowered in-network emergency physician payments by 9%. An initial study from Georgetown found that the NY OON Law including the IDR was working well, noting wide stakeholder approval. However, a subsequent Georgetown study, bolstered by federal Congressional Budget Office analysis, raised concerns that doctor bills have increased as much as 5% in response to the NY OON Law. Those findings have been disputed.

As to which side prevailed more often, the DFS report found that providers have won more often than health plans when the emergency services and surprise bill results are combined for 2015–2018. However, that is not the case when the results are considered based on decision type for 2015–2018. With respect to emergency services, 43% of decisions were in favor of the health plan, 24% were in favor of the provider, and 33% were split between the health plan and provider, which occurred when more than one current procedural terminology (CPT) code was submitted for the patient’s services and the IDR found in favor of the health plan for some codes and the provider for others. Nevertheless, beginning in 2018, providers prevailed more often than health plans for disputes involving emergency services. With respect to surprise bill decisions for 2015–2018, 13% were in favor of the health plan, 48% were in favor of the provider, and 39% were split between the health plan and provider. One unexpected finding DFS encountered is that several services may be provided during one date of service, and a significant number of both emergency and surprise bill decisions have found in favor of the health plan’s payment for some services and the provider’s charge for other services in these situations.

Each approach—benchmark and dispute resolution process—has pros and cons. To date, there has not been a thorough review comparing the California and New York approaches to claims payment for protected OON bills.


Q: If each of the 3Rs were operational for 2021 (as they were for 2014–2016), what impact would they have on the rate review process for 2021 rates?

Each of the 3Rs—risk adjustment, reinsurance and risk corridors—played its own unique role in helping stabilize the Marketplaces during the first three years of Marketplace operation. Today, only risk adjustment remains as a federal program, though 12 states have replaced federal reinsurance with state programs and three more states have proposed to add reinsurance programs for 2021. Risk corridors are not used today, though they could be very helpful in addressing the uncertainty facing regulators and insurers with regard to 2021 premiums.

As work proceeds on better defining COVID-19-related costs, including the extent to which deferred care will lead to increased claims costs in 2021, Congress could restore reinsurance and/or risk corridors to supplement the ongoing risk adjustment program, which is unlikely to change in the near term but may need modification in the future when we know more than we do now about the distribution of COVID-19 costs.

Congress has been considering a number of proposals for restoring a national reinsurance program that would build on the original federal program as well as the current state programs. At this stage, a federal reinsurance program for 2021 would make most sense if it were focused on the risks posed by COVID-19, including the potential for costs to vary dramatically by state and insurer, and to be less concentrated in a small number of very expensive cases given the large volume of testing that is anticipated. The simplest approach would be to cover a specified portion of COVID-19 costs as a stand-alone program. This could also work as a supplement to the state programs that typically cover all claims above a threshold amount with some risk-sharing by insurers above that attachment point.

Proponents of a national reinsurance program point to the fact that the original national program cut rates by 10% in the three years it was operative, and that the 12 states that have adopted their own programs since 2017 through Section 1332 state innovation waivers have achieved similar results. Restoring a national program tailored to the current crisis would be far more efficient than expecting each state to develop its own program, though allowance could be made for states that do have their own programs.

Congress could also reconsider the value of the risk corridor program in the current crisis. Risk corridors have been an important and noncontroversial feature of the Medicare prescription drug program for nearly two decades. In theory, risk corridors are the best antidote to actuarial uncertainty since they compensate insurers for losses incurred when substantially underestimating risk leads to overly low rates, as well as recover insurer profits gained when substantially overstating risk leads to inflated rates.

Such a program would seem to be ideal right now. To the extent that insurers are likely to worry more about understating COVID-19 costs, risk corridors would deter them from pricing too high and protect them if they priced too low. Indeed, these incentives may be critical to avoiding the inflated pricing that we saw in 2018. In that case, insurers and regulators were forced to act quickly when cost-sharing reduction (CSR) reimbursements were terminated late in the rate review process and rates had to be adjusted shortly before the start of open enrollment. The adjustments were successfully made through “silver loading” but the resulting rate increases were, in retrospect, larger than they needed to be because of the tendency to overcompensate for uncertainty. Premiums have stabilized since then through a combination of rate adjustments and record high medical loss ratio (MLR) rebates, but it would be better to get prices closer to right and minimize later adjustments.


Q: Should insurers consider adding language regarding financial solvency of the provider to participating provider agreements? What about adding language to participating provider contracts regarding solvency of the self-insured employer where the health plan is acting as a third-party administrator?­

To protect all parties, both health plans and providers should consider language regarding financial solvency in participating provider agreements. This may be particularly prudent in light of COVID-19 or any similar pandemic or public health crisis.

As noted in the webinar, some providers are experiencing serious financial difficulties related to the suspension of nonurgent, non-COVID-19 care. And many providers are pointing out that some insurers may be experiencing a short-term windfall due to this unexpected downturn in claims payout. Some state regulators have been engaged in discussions around short-term financial assistance from insurers to struggling providers. New York, for example, just issued guidance directing insurers to find providers in financial need and develop a plan for assistance. Some insurers are reporting requests from self-insured employers for financial assistance due to the economic downturn contributed to by the pandemic.

Thus, aside from all the regular reasons that plans and providers may seek to include solvency provisions in their participation agreements, COVID-19 has shown that it may be prudent to consider addressing financial conditions, and the terms under which assistance, if any, from the insurer will be provided. Likewise, insurers acting as third-party administrators for self-insured employers may want to be particularly clear with providers about the ultimate responsibility of the employer to pay the claim, and what options may exist in the event of employer insolvency.

Furthermore, providers may want to include language that specifies assistance from insurers where a pandemic or other event provides an unexpected financial gain for insurers and a loss for providers.

Several key issues are initially apparent. For example, what if any level of pandemic or other crisis will trigger insurer assistance? How much of an unexpected gain in reduced claim cost will be needed? And of course, what level of assistance, if any, will the insurer provide and what form will it take: periodic interim payment, loan or straight grant of funds?

Significantly, these participating contract provisions may not completely insulate the health plan from efforts by providers and public officials to seek financial relief from the insurer or third-party administrator in times of crisis like COVID-19. But it may help to set expectations and demonstrate that these actors have independently addressed the issue.

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