Moody’s: Cost waivers, premium credits signal strength for health insurance industry

Photo | Gale Development The Campus at Greenhill in Wallingford houses insurer Anthem Health.

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By Matt Pilon

During the COVID-19 pandemic, major health insurers have eliminated out-of-pocket costs for telehealth services, and some have even offered gratis in-person doctor visits, whether related to the virus or not.

That financial flexibility has helped insurers come across as customer-friendly and willing to help during an unprecedented health crisis, but according to a new report from Moody’s, the discounts also signal that COVID-19 has not cost the companies as much as some expected, leaving them in a strong financial position for what could be a record second quarter.

Anthem, whose Connecticut headquarters is in Wallingford, is the latest insurer to announce givebacks. Last week, the company said it would provide customers in July with a one-month premium credit worth up to 15% for health care and 50% for dental care, and also expanded its list of free telehealth services, extending those offerings through September, and said it would cover in-network COVID-19-related care through year’s end. In all, the assistance is worth $2.5 billion, according to Anthem.

In a June 8 report, credit ratings agency Moody’s said Anthem’s offering, which adds to other assistance previously unveiled by UnitedHealthcare, ConnectiCare, Cigna and Aetna, signals confidence.

“The financial assistance is credit positive because it shows the costs of the coronavirus pandemic have not diminished the credit strength of the health insurance industry,” the report said.

COVID-19 hospitalizations continue to fall in Connecticut and across the country overall, which is “a good sign for U.S. health insurers, whose coronavirus costs are clearly declining from when the peak of coronavirus cases occurred in early second-quarter 2020,” Moody’s said.

The report said Anthem’s decision to offer the assistance is partly about ensuring the company stays above minimum loss thresholds. Claims activity has fallen during the pandemic, as hospitals and other providers suspended elective procedures to prepare for a wave of COVID-19 patients.

“Still, if Anthem, UnitedHealth and others are confident enough to offer extensive financial assistance packages, it suggests that despite the peak in the second quarter, overall coronavirus costs are low,” the Moody’s report said. “In fact, we think the second quarter could be a historically good quarter for the health insurance industry.”

There are still risks ahead, however, the Moody’s analysts wrote. Commercial enrollments are expected to drop, and insurers will have to try to make up those lost premiums in the Medicaid or individual markets. There will also be pent up demand for medical services, which is expected to increase costs in the second half of this year. A second wave of COVID-19 would also have financial ramifications. Then there’s public perception.

“Finally, if the health insurance sector’s profit seems unusually large, it could increase political risk for an industry that is already in the political cross hairs,” the report concluded.