Chart Review: Covid-19-Related Costs For Insurers

Margaret Barnhorst, Health Care Policy Intern

According to a recent projection from Covered California, the state’s Affordable Care Act marketplace, COVID-19-related costs for commercial insurers nationally could range from $34 billion to $251 billion this year, with a “best estimate” at $103 billion. Estimated costs include COVID-19 testing, hospital stays for severe cases, and outpatient services for infections among the 170 million Americans in the commercial-insurance market. In order to recoup these costs and budget for anticipated COVID-19-related costs in 2021, insurance companies may increase premiums and employers may shift more costs to employees. The National Association of Accountable Care Organizations has a similar projection of COVID-19-related costs over the next year for Medicare, ranging from $38.5 billion to $115.4 billion. Increased Medicare costs would particularly impact health care organizations participating in payment models, potentially leading to the loss of shared savings, and as a result Accountable Care Organizations could drop out of Medicare to avoid losses. The CARES Act, which allocates $100 billion for hospitals and increases Medicare’s reimbursement rate by 20 percent for COVID-19 cases, could offset some of these increased costs. Medicaid costs will also rise as a result of the COVID-19 outbreak. With the Families First Act increasing the federal government’s share of Medicaid expenses by 6.2 percentage points, and assuming a 5 percent increase in the need for care, federal Medicaid expenditures could increase by $56 billion this year.

Commercial insurance data (testing, outpatient, and hospital costs) obtained from Covered California; Medicare data obtained from the National Association of Accountable Care Organizations

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