Report: COVID-19 to have lasting impact on insurers

The pandemic has upended the financial landscape for health insurers, according to a report by BDO Insurance Practice that provides a series of steps companies can take to lessen the shock to their balance sheet that COVID-19 has brought.

Among the effects of the pandemic has been spiking unemployment that’s siphoned away premiums that insurance companies have been collecting on insured customers, says the report.

That puts a strain on insurers’ reserve balances that they use to pay claims, BDO says adding it’s possible that insured members may delay care as their health deteriorates leading to higher claims that originally estimated. The report notes the pandemic has also added uncertainty into calculating 2021 premiums, and there’s uncertainty about the cost of treating and testing for COVID-19.

Before the pandemic, BDO says insurers could rely on a membership stable enough to set premium reserve levels and calculate premiums with relative accuracy.

“COVID-19 has fundamentally disrupted this landscape and forced insurers to think creatively in order to reduce their financial exposure,” The BDO report says.

The authors lay out a series of steps that insurers can take to lessen their financial risks, such as running multiple scenarios when compiling their 2021 premiums, identifying chronic conditions in newly-insured customers and supporting risk mitigation programs from the federal government such as creating a COVID-19 high-cost risk pool.