The COVID-19 Pandemic – Insurer Insights Into
Challenges, Implications, and Lessons Learned
Support for this research was provided by
the Robert Wood Johnson Foundation. The
views expressed here do not necessarily
reect the views of the Foundation.
June 2020
By Kevin Lucia, Linda J. Blumberg, Emily Curran,
John Holahan, Erik Wengle, Olivia Hoppe, Sabrina Corlette
U.S. Health Reform—Monitoring and Impact
U.S. Health Reform—Monitoring and Impact 2
INTRODUCTION
The novel coronavirus (COVID-19) pandemic has placed
enormous pressure on virtually all facets of U.S. society,
including the economy, family livelihoods, the health of
millions of people, and the health care system. Much attention
has appropriately been placed on the eorts of health care
providers to deliver care to those infected with COVID-19.
However, less is known about the experiences of the health
insurers who reimburse the health care providers for the
care they deliver, as well as insurers’ insights into what the
pandemic might mean for public and private insurance
coverage, insurance premiums, and benets going forward. We
discussed issues related to the pandemic with representatives
from 25 insurers from April 16 - June 9, 2020. Their impressions
of the ongoing ramications of the pandemic and their
response to the crisis are summarized here*:
Insurers entered the COVID-19 crisis in a strong nancial
position and, as a result, have been able to assist providers
and consumers nancially by decreasing paperwork
barriers and making it easier to access care faster.
While the majority of insurers expect the economic
downturn and rising unemployment rates to have a
signicant impact on their employer business, most
have not yet seen a signicant drop in coverage among
employer clients, especially those oering large group
coverage. Insurers are most concerned for their small
employer clients and expect that many will drop coverage
as federal support declines and the crisis persists.
Insurers anticipate large increases in individual
marketplace enrollment in the coming months, though
this enrollment has been slow to materialize so far.
Insurers are taking steps to prepare for members’ coverage
transitions and believe their companies are ready to
absorb higher enrollment, if and when it comes.
Insurers’ Medicaid enrollment is increasing at a faster pace
than their marketplace enrollment, though still at a slower-
than-expected rate. Insurers are split on whether their
states’ Medicaid programs are prepared to process and
serve a potential inux of enrollees.
Insurers have taken a number of steps to assist providers
who are struggling nancially, including accelerating
payments, oering loan assistance support, and making
payments on value-based contracts, regardless of initial
targets. Insurers have concerns about how the crisis might
aect their longer-term relationships with providers,
including whether it will trigger increased consolidation,
cost shifting, and demands for higher reimbursement.
Insurers’ experience with COVID-19-related costs thus far
leads them to believe that the nancial impact on 2021
costs (and thus premiums) is likely to be minimal. However,
insurers face a signicant degree of uncertainty that could
impact premiums in the long run, including whether they
will be required to cover multiple COVID-19 diagnostic
tests, as well as antibody tests, and how much elective and
deferred care will return.
With support from the Robert Wood Johnson Foundation (RWJF), the Urban Institute
is undertaking a comprehensive monitoring and tracking project to examine the
implementation and eects of health reform. e project began in May 2011 and will take
place over several years. e Urban Institute will document changes to the implementation
of national health reform to help states, researchers and policymakers learn from the process
as it unfolds. Reports that have been prepared as part of this ongoing project can be found
at www.rwjf.org and www.healthpolicycenter.org.
*is report reects federal and state policies and interview ndings as of June 9, 2020.
Policies and industry trends may have evolved since this date.
U.S. Health Reform—Monitoring and Impact 3
Most insurers feel that the COVID-19 crisis has not
prompted a need to change benet designs to any great
degree, though they believe that telehealth benets are
here to stay and the use of alternative care settings will
likely expand.
Insurers acknowledge that changes to the health care
system are needed to address health disparities, especially
racial and ethnic disparities, but they are unsure of where
to begin, how to nance these eorts, and how to spark
meaningful change.
Though insurers have only begun to identify “lessons
learned” from the early phases of the pandemic, this
experience has better prepared them to some extent for
what is to come.
BACKGROUND AND APPROACH
In January 2020, the rst conrmed case of coronavirus
was reported in the U.S. and the World Health Organization
declared the coronavirus spread to be a public health
emergency of international concern.
1
By March, the U.S. led
the world in coronavirus infections
2
and, as of June 2020,
the disease has infected over two million individuals in the
U.S. and over 115,000 have died as a result.
3
As the virus
spread, Americans’ day-to-day lives changed dramatically.
Individuals in most states were placed under stay-at-home
orders, schools transitioned to online environments, and
consumers’ engagements with the health care system were
signicantly restricted as hospitals and providers prepared
to triage a surge in individuals with COVID-19 infections. As
the crisis continues, it has forced the health care system to
confront critical issues in operations, including a shortage
of personal protective equipment (PPE) and the availability
and aordability of testing for COVID-19 detection and
treatment for those with and without health coverage. It has
also spurred dicult economic realities, leading to historic job
losses and the potential for loss of health insurance coverage.
Many experts predicted early on that large numbers
of workers and their family members would lose or be
required to change their health insurance coverage as they
experienced job and income losses due to the pandemic.
4
But, a change in coverage might not mean a drop in coverage.
Unlike earlier economic crises, the existence of the Aordable
Care Act (ACA) could help to blunt some of the coverage
losses due to COVID-19, thanks to the availability of subsidized
marketplace plans and expanded Medicaid programs (in most
states). As one analysis shows, the share of the unemployed
who are uninsured fell dramatically (about 20 percentage
points) after the ACA’s coverage reforms were implemented,
predominantly through higher levels of Medicaid and
nongroup insurance coverage.
5
As a result, it is safe to
anticipate that pandemic-related decreases in employer-
based insurance could lead to higher levels of Medicaid and
marketplace subsidy eligibility and enrollment.
6
As consumers transition between job-based and other
coverage options, it is important to understand the role
that the insurance industry has played in responding to the
COVID-19 crisis and its experience to date. Almost immediately,
many insurers took steps to ease consumers’ issues with access
to care by covering and waiving cost sharing for COVID-19
testing; some did the same for the services needed to treat
COVID-19.
7
Many also tried to make it easier for providers to
focus on patient care by reducing administrative burdens.
8
Although many insurers took these steps voluntarily, federal
and state regulators also issued benet and coverage
mandates to ensure that consumers were obtaining COVID-19
care without nancial barriers.
9
In just a few months, the
insurance industry has witnessed the profound impact of
COVID-19 on the health care system, as utilization of non-
COVID-19 related medical care has dropped precipitously,
some providers have struggled to remain nancially viable,
and employers have struggled to keep their employees’ health
plans intact. During this time, insurers have adjusted benets
to permit broader use of telemedicine, oered exible nancial
arrangements for those unable to pay their premiums, and
invested in community eorts that may help to address some
of the root causes of disparate COVID-19 outcomes.
In many ways, health insurers are in a uniquely advantageous
position to provide early insights into the implications of the
pandemic, as they interact directly with health care providers,
employers, government ocials, and consumers. While
company strategies vary, insurer experiences in employer,
nongroup, and Medicaid markets allow them to assess how
coverage is shifting across markets, how costs associated
with testing and treatment are aecting overall health care
spending, the extent to which dierent types of providers
are experiencing nancial distress, and how federal and state
regulators and program administrators have and have not
been prepared to assist. Their experiences to date can help
inform policies that could improve our ability to respond to
future pandemics, economic downturns, or other disruptions.
U.S. Health Reform—Monitoring and Impact 4
To better understand early insights into the implications
of the pandemic on the health coverage system from the
perspective of insurers, we conducted structured interviews
with executives of 25 insurance companies collectively
representing private markets of all sizes in all states and
the District of Columbia. The companies included for-prot
insurers operating nationally or across multiple states;
nonprots operating regionally or locally and at least one
local insurer in each of the following states: California,
Colorado, Georgia, Illinois, Louisiana, New York, Virginia,
and Washington. Interviews were conducted from April 16
through June 9, 2020.
FINDINGS
Insurers Are Well-Positioned Financially to Navigate the
Crisis, At Least For Now
While hospital and health systems have struggled nancially
during the crisis to aord the costs of providing additional
care to patients and equipment to providers,
10
health insurers
have largely not been nancially burdened by COVID-19,
to date. As the crisis emerged, insurers reported that they
successfully transitioned the majority of their sta to work
from home and collaborate through a virtual environment.
Insurers explained that there were few hiccups, if any, in
continuing their regular operations and sales. To prepare
for a potentially high volume of COVID-19-related claims,
insurers reported acting quickly to strengthen their nancial
footing. For example, some reported preparing for the worst
by enhancing their liquidity, drawing down additional lines
of credit, and taking stock of their reserves. Even before
the COVID-19 crisis had fully materialized in the U.S., many
for prot insurers had previously publicly reported strong
revenue gains at the close of the rst quarter of nancial
earnings for 2020.
11
Insurers, therefore, went into the crisis on solid nancial
ground and their nancial position has continued to
strengthen as the crisis has continued. Most insurers we
interviewed reported that as much as 30 to 40 percent of
elective care has been deferred, resulting in substantially
less overall spending than in a typical year. In addition to
spending less overall, insurers’ COVID-19-related claims have
been lower than anticipated and, to date, they have not had
to dip into the nancial resources that they secured in March.
While this trend in claims could change at any moment, no
insurer we interviewed expressed concern with their current
nancial standing. Because of this strong positioning, insurers
were able to assist providers and consumers nancially by
decreasing paperwork barriers, such as prior authorization
requirements, and making it easier to access care faster. Some
insurers used their excess cash to support their primary care
providers and hospitals with advances or other support, while
others redistributed their higher-than-expected revenues in
the form of premium rebates to consumers. As one insurer put
it: “Without being in good nancial shape, we couldn’t have
done that.”
Employer Business Remains Surprisingly Stable, but
Concerns that Small Employer Clients will Drop
Coverage Persist
Employer Business Remains Stable
As the COVID-19 crisis evolved, the majority of insurers
expected that the economic downturn and rising
unemployment rates would have a signicant impact on
their employer business. However, despite unemployment
rates reaching the highest levels since the Great Depression,
12
most insurers interviewed were surprised to report that they
have not yet seen a signicant drop in coverage among their
employer clients. One insurer who expected to see “material
membership reductions” instead stated being simply “shocked
and not sure what to make” of their employer business
remaining so stable. Another insurer described that the
number of employers dropping coverage is no higher than
what they would expect to see in a regular quarter. A third
insurer claimed that its steady employer-based enrollment
simply does not “correlate” with the rising unemployment rate.
Although insurers did not yet have data to fully understand
why the employer block of business has remained largely
unchanged during the crisis, many oered explanations as
to why this trend might be occurring. For one, insurers were
quick to point out that many of the sectors hit hardest by
the crisis, including the entertainment, retail, and restaurant
industries, tend not to oer health insurance benets in
the rst place. Next, despite the challenging economic
circumstances, insurers described a “hold-on mentality,” with
some of their employer clients having a “degree of optimism
that the lock down will lift and there will be a return toward
normalcy.” Early in the crisis, some employers believed that
the economic rebound would be faster than that experienced
during the 2008 nancial crisis. Therefore, instead of letting
employees go, many employers have embraced the concept
of “furloughing” sta, meaning they are no longer on payroll
but are allowed to maintain benets, including eligibility for
the group health plan. As one insurer described: “There’s at
least an interest with some of these groups to – even if they’ve
reduced hours – continue making premium payments for
employees’ health care coverage.” Several insurers conveyed
that many employers are “just trying to support employees as
U.S. Health Reform—Monitoring and Impact 5
best they can.” Further, many insurers were condent that at
least some of these impacts have been stalled by a signicant
number of their at-risk employer clients taking advantage of
the Payment Protection Program (PPP), established by the
CARES Act.
13
One insurer stated that the PPP was “working,
that the money made available to small employers has been
helping, and gives them extra cash to continue paying for
insurance.” Still, some interviewees cautioned that furloughs
could turn into permanent layos and cause a meaningful
change in their employer business in the coming months.
For most insurers, if a signicant number of employer clients
drop coverage, the loss of revenue would have a greater
impact than other crisis-related factors. Insurers, anticipating
“dire losses” in their employer business at the start of the crisis,
have oered employers mid-year open enrollment periods,
more exible payment arrangements, and longer premium
“grace periods” than those required under state law. Among
the insurers that have extended their grace periods, most
report that an increasing number of employers are taking
advantage of the exibility. Some insurers have quietly
implemented a company policy to not terminate employer
clients for lack of payments during the rst few months of
the crisis. As one insurer put it: “We’ve been clear that our top
goal is to keep [] employees in the group sector . . . because
we would prefer they stay in the group market than chance
them going to the individual market and never coming
back.” However, insurers expressed concern that as federal
PPP funding dries up, “customers’ ability to pay premium[s]
might get harder.” For example, one insurer worried whether
“companies will be able to sustain [their plans through] June
and July.”
Small Employer versus Large Employer Book of Business
Overall, insurers expressed far more concerns about the
future of their small employer clients – dened, in most
states, as those with 50 or fewer employees – than their large
employer clients. For the most part, the insurers reported
that their large employer clients have maintained their plans
and interviewees expressed little concern about upcoming
coverage losses. Still, some characterized large employers’
experience thus far as a bit of a mixed bag, with one insurer
depicting a “tale of two cities.” This insurer noted that some
sectors, such as technology rms, have actually been “growing
by tens of thousands” during the crisis, while other large
employer clients, like school districts, were “shrinking slightly.”
A number of insurers explained that if their large employer
clients were experiencing nancial diculties, they were more
likely to seek modications to their policies (e.g., reducing
benets, increasing cost-sharing) than to drop coverage
altogether. As noted above, many insurers indicated that it
was in their best interest to accommodate these modication
requests, when possible.
Insurers also raised few solvency concerns about their self-
funded clients. One insurer noted that while self-funded plans
are “not completely immune to economic stresses,” it has seen
some actually expand coverage of services, like telehealth,
during the outbreak. Another insurer posited that self-funded
employers might stand to gain during the crisis “to the extent
that their claims savings are bigger than any of the direct
COVID[-19] costs.”
On the other hand, insurers expressed numerous concerns
with their small employer clients. As one insurer described:
“Small businesses are cash business[es], they’re month to
month, and, even in a good economy, they go bankrupt.”
While most insurers did not have a condent estimate of the
number of small employers that are likely to drop coverage,
early indications suggest that a wave of disruption is on the
way. First, many insurers reported that a higher number of
small employer clients than usual are already in payment
delinquency, in one case, double the number than in a typical
year. Second, a few insurers reported an abnormal increase
in calls from their small employer clients. For example, one
insurer that predominantly sells to small businesses said: “We
didn’t have a huge disruption initially but we are [now] having
a lot of [small] employer groups calling and saying, ‘What kind
of payment plan can I do?’” Some insurers have already started
to see their small employer numbers decline. Most insurers
expect these declines to continue as clients exhaust their PPP
benets and reach the end of their grace periods.
Increased Enrollment in the Individual Market is Expected,
But Large Increases Have Not Yet Materialized
While many insurers we spoke with anticipate large increases
in individual marketplace enrollment in the coming months,
this additional enrollment has been slow to materialize.
Voicing a common observation, one insurer explained that
despite oering a special enrollment period for individual
market coverage: “We haven’t seen many [new enrollees].
The unemployment rate went up signicantly, but we haven’t
seen people yet migrating . . . we expect that to change over
the next few months.” Insurers expressed similar sentiments
about the individual market as they did with the employer
market, noting that the use of PPP funds and furloughing has
likely created a lag in coverage transitions.
For those insurers who are beginning to see coverage
changes, some are taking steps to ensure a smooth transition.
For example, they have deployed agents or brokers to give
departing employees information on marketplace policies
as they disenroll from employer plans. Others are oering
