Diversified Insurers May Have Advantage Amid COVID-19 Pandemic

by Leslie Small

As the COVID-19 crisis continues to ramp up in the United States, projections about how it will affect various business sectors — including managed care — are evolving rapidly. But one concept that industry analysts seem to agree on is that health insurers with diversified business models may be better equipped to weather the storm.

To Peter Manoogian, principal at the health care consultancy ZS Associates, a main reason for the value of diversification comes from simple math. During the last financial crisis in the mid-2000s, about 5 million people shifted out of the employer-sponsored plan market when they lost their jobs, says Manoogian. Now, all signs point to the fact that the coming economic crisis will be even worse, so odds are that considerably more than 5 million people will move from the employer-plan market to the Affordable Care Act exchanges or Medicaid.

"So if I'm a health plan and I'm thinking about my business strategy, it would certainly behoove me now more than ever to be really diversified in the lines of business that I offer," Manoogian says.

Ralph Giacobbe, a health care sector analyst for Citi Research, remarked during a March 24 webinar about COVID-19 that managed care companies look quite different than they did during the last economic crisis.

"I think we also have to recognize [that there are] much more diversified business models from where we were even just five, seven, 10 years ago for a lot of these companies — that helps dampen some of the impact from potentially higher unemployment rates," he said.

"Netting it all out, we essentially see [the COVID-19 crisis as] neutral for the sector — perhaps aside from Humana, which does have a little bit more of a disproportionate exposure to the elderly population given its MA [Medicare Advantage] business mix," Giacobbe said.

Although health insurers might see challenges in the coming months, both S&P Global Ratings and A.M. Best said in recent reports that their outlook for the sector remains "stable."

From Health Plan Weekly