Like the rest of society, the US health insurance system is going to change in the wake of the COVID-19 pandemic. The question is whether changes will be made deliberately, through policy actions, or reactively, through the markets.
The American health care system has been at the forefront of the COVID-19 crisis in more ways than one. While some areas of the health care system have been overburdened, other sectors have seen declining revenue and furloughed employees. From a shortage of acute care beds, to high levels of under- or uninsured Americans, poor quality in long-term care facilities, and lack of ventilator inventory, the current crisis has exploited the weaknesses that come with America’s for-profit health care system. Given pre-COVID attitudes towards health insurance, the strain this pandemic has added to the care system, and drastic changes to employment levels, there will no doubt be lasting impacts on the US health insurance system that arise from the current crisis.
Many of the world’s health insurance systems were born out of crisis:
- After decades of study, Taiwan quickly implemented a single payer system in 1995 to install a more equitable system ahead of the country’s first democratic elections in 1996.
- In response to the Great Depression of the 1930’s, New Zealand legislated a health insurance system with free care for all (via the Social Security Act 1938).
- The United Kingdom’s National Health Service grew out of World War II when the governing Labour party institutionalized the Emergency Medical Service, a wartime nationalization of the country’s health care system.
- Likewise, the US system’s reliance on employer benefits came about during the same time period. Wages in the US were fixed to support the war effort so, to attract and retain top talent, employers competed on fringe benefits such as health insurance.
The magnitude of systemic reform will depend on our collective willingness to change rather than reestablish the status quo. However, we may be unable to return to a pre-COVID state. Below are a few possibilities for how the COVID-19 pandemic may affect the US health insurance system.
1. Attempt to Return to the Status Quo
Understandably, there may be resistance to changing the health care system with the economy in peril and epidemic still uncontrolled. People tend to be risk averse, and in the midst of a crisis, it is understandable there would be an inclination to reinstate pre-pandemic institutions. However, assuming the US can return to the same system that existed in January 2020 may only be wishful thinking.
For the past several years, premiums and deductibles have been increasing faster than wages, and there could be even steeper increases to come. Health insurance companies set premiums using models of expectations of future utilization. While many people fell sick from COVID-19, and some of those people needed intensive and expensive care, others have forgone elective and non-elective procedures. When social isolation ends and providers resume normal schedules, there may be pent-up demand for care, as well as new waves of COVID-related illnesses. Higher expectations of utilization over next year may lead to premium increases.
For some beneficiaries, higher premiums mean health insurance may no longer fit into their household budget. Among those who will forgo health insurance will be the healthiest people–those who pay premiums, but use less care. When healthier people drop coverage, insurer expectations of the ratio of payouts (reimbursement for services) to income (premiums), the basis of the premium-setting algorithm, increase. From the payor perspective, this means additional premium increases would be needed to cover expected increases in payouts. The higher premiums become, the more people that may drop out of market. This is referred to as a “death spiral” and could destabilize the health insurance market.
2. Shift Away from Employer-Sponsored Insurance
Unemployment is soaring to historic levels and, as people lose their jobs, they lose their employer-sponsored health insurance. Typically, enrollment in Medicaid, the public health insurance system for people in need, increases during economic downturns. Medicaid rolls increased in 2009 during the global recession and decreased as the economy improved. While Medicaid enrollment may increase during the current recession, unlike 2009 Medicaid is not the only option for the unemployed. Since 2014, the Affordable Care Act (ACA) marketplaces have offered an alternative to employer-sponsored health insurance. As unemployment increases, the ACA marketplaces are likely to grow, especially in states that did not expand their Medicaid programs.
Health insurance markets thrive on large risk pools. Generally, the more people of varying risk levels that join a plan, the lower the premiums. Lower premiums attract more beneficiaries, further broadening the risk pool. As more people join ACA-compliant plans, and premiums decrease, the ACA marketplace will become stronger. If there is a robust individual market for health insurance, employees may feel comfortable purchasing their own insurance plan. Decoupling health insurance from employment would leave employers with more capital to reinvest in the business or in wages, which could bolster a sagging economy.
A robust individual market for insurance will require tax parity for health insurance premiums. Parity means all health care dollars would need to be treated the same with regards to taxation. Either all dollars would need to be pre-tax, as they are currently in the employer-sponsored market, or none should be.
3. Telehealth Parity
In response to pandemic-driven quarantine requirements, providers cancelled elective and non-elective procedures, leading to decreased revenue for private practices and hospitals. Payers enacted temporary measures, such as full reimbursement for telehealth, to alleviate the pain to providers.
As recently as a few months ago, payers restricted access to telehealth services. In response to the pandemic, Medicare and many commercial payers temporarily enacted policies to ease the path for telehealth services. Now that patients have become more accustomed to telehealth, they may demand more telehealth services in the future. Telehealth is easier and more convenient for many patients. Examples are patients who are ill or disabled and may be more comfortable receiving care without leaving their home; those in rural areas who want to avoid long travel times; and patients hoping to avoid lines and germs in waiting rooms. Some are betting that payers will make these temporary changes permanent, solidifying acceptance of telehealth services.
4. Move Towards Single Payer
If the economic effects of the pandemic encourage the US to bolster the social safety net, we could see a shift towards a single payer system. However, while “single payer” and “Medicare for all” are great campaign slogans, they can mean different things in practice. For example, governments can finance single payer systems through taxes or premiums or a combination of the two. In some single-payer systems, providers are salaried government workers, while in others there are private providers within the system. The logistics of how a single payer system would be operationalized in the US is still unknown.
Universal Coverage is Key
Regardless of how current events shape the health insurance system, the recent pandemic has highlighted the need for health insurance. Currently in the US, health care is prohibitively expensive without insurance, and un- or underinsured people often forgo needed medical care. If people avoid needed care, it will be harder to detect and avoid future pandemics. Without treatment, the un- and underinsured will remain contagious, fanning the pandemic flames.
The US health insurance system has been teetering on the brink of change for decades. Clinging to an antiquated system will only exacerbate the deficit and leave us more susceptible to future pandemics.
Editor’s note: Check out our other recent post on universal coverage in our ongoing series here.
Emily Gillen