Dan Gorenstein: $6.6 billion. 

That’s how much UnitedHealth Group — the nation’s largest health insurer — reported in earnings in the 2nd Quarter this week — double what it earned last year at this time. 

In a press release, the company said its earnings were “substantially higher than anticipated due primarily to the unprecedented, temporary deferral of care.”

Insurers are in a tight spot — reaping financial windfalls while they watch doctors, hospitals and consumers get whacked by the pandemic. 

Today, insurance executives insights into how the coronavirus is impacting people and the backbone of our health care system. 

From the Annenberg Studio at the University of Pennsylvania, I’m Dan Gorenstein, and this is Tradeoffs.

DG: Over the past four months, we’ve heard from providers, health systems and patients about the struggles they’ve faced during COVID. 

But what about insurers?

Insurance companies know the care consumers get, or don’t, and how much doctors and hospitals get paid.

Linda Blumberg from the Urban Institute and Kevin Lucia from Georgetown’s McCourt School of Public Policy have spent the last several months talking with insurance executives from 25 companies and have written up their findings. 

One note: the insurers agreed to talk candidly with the two researchers as long as company names remained anonymous. 

DG: Linda, as a reporter who’s been trying to interview insurance companies for almost a decade now, I find sometimes the insurers can be quite reticent and are not actually interested in talking too much. It sounds like you found a really receptive group of payers here. Is that right? 

Linda Blumberg: Absolutely. One of the things we found was that they were making a lot of efforts to try to help providers and employers and consumers through this period. I think a lot of them felt like they had stories to share that were really positive about what they’d been doing.

DG: Kevin, when I think about your research here, it seems like we can put your findings into a few buckets. I’ll call them the three Cs: costs, customers and coverage. 

And let’s start with the costs. At the beginning of this crisis, we talked to a few really baffled actuaries. Like the rest of us, they were completely unsure how this was going to play out. A few months in, what sorts of costs are insurers actually seeing?

Kevin Lucia: Insurers thought that the costs were going to be significant. And what ended up happening is at least initially, the number of people actually getting testing was lower than expected, the number of people that were being admitted to the hospital for care was lower than expected. At the same time, a significant percentage of what they had expected to give care for non-covid costs going down — so fewer people getting testing and treatment and then less people getting elective care. And the combination of those I think led to issuers not spending as much money as they had anticipated.

DG: Kevin and Linda found that most insurers reported as much as 40% of elective care was deferred. 

But people didn’t stop getting sick — so where’d all the heart attacks go? And where did all the strokes go? 

Linda, in your conversations with insurers, did any of them have any idea of what is happening to people who are not showing up for their primary care visits, and the hospital?

LB: We didn’t really get into that topic, but I think, there is data starting to emerge that mortality for non pandemic-related reasons has gone up. They did mention that they thought that there would be some increase in morbidity and severity of conditions from people missing visits and care that they should have gotten earlier.

DG: With COVID cases spiking across the country, new hot spots emerging, health care costs will likely increase as more people get tested and treated for COVID and return to the doctor.

What does that mean for premiums in 2021? Linda and Kevin think it’s going to be small  — zero to 2% on average based on what insurers told them.

Of course, that all depends on how the pandemic plays out over the summer. 

LB: Any issuer that tells you that they know what to expect and how this is going to affect them is not telling you the truth. They were all doing these really kind of broad ranges of guesstimates as to different scenarios and how they would affect their costs going forward. But, you know, the uncertainty is is huge for them as it is for all of us.

DG: Several reports have come out recently estimating the number of people who have lost their work-based health insurance because of the pandemic. 

An analysis published this week from Families USA — a nonpartisan consumer advocacy group — put the number at 5.4 million Americans between February and May.

Kaiser Family Foundation thinks that figure will be closer to 27 million but included family members. 

The Urban Institute, where Linda works, thinks it’s about 10 million people.

That brings us to our next ‘C’ customers. 

With all the economic hardship, insurers were expecting a run on Medicaid and the Obamacare exchanges.  

LB: They were seeing increases in those markets. But it wasn’t the order of magnitude that many people thought initially that it was going to be a flood and the flood was going to come quickly. They were talking about, at the point where we had heard from them, you know, losses of under 5%.

KL: Yeah, I do remember at least one issuer just being totally shocked. that they weren’t seeing, huge, you know, hits to their employer block of business.

DG: With 21 states pausing or reversing their reopening plans as of this week, prolonged lockdowns may drive more job loss and move the needle on this block of business.

Ok. On to our third C: Coverage. 

When it comes to new services, in addition to waiving cost-sharing for COVID-19 testing and treatment, the biggest shift has been in telehealth coverage. 

KL: We heard consistently from insurance companies that the use of telehealth by consumers and the adoption by providers was here to stay. 

DG: Are insurers planning to pay for telehealth in the same way? Did they talk about reimbursement rates?

KL: The question is, should issuers pay for it for the same for a telehealth visit as it would cost to actually go into a brick and mortar facility, which you pay rent and staff and you have equipments and at this early phase, you have to remember issuers wanted people to have access to the care that they needed. And generally, I think that we’re paying parity for these visits. Some insurers want to continue the conversation on how much they should be paying going forward. 

DG: But Kevin and Linda say insurers are concerned about reimbursing telehealth visits at the same rate as in-person visits. 

They’re worried about fraud and abuse. 

LB: If it’s really easy to obtain care by doing it from the comfort of your living room. You might use quite a bit more care than you did otherwise as well. And so there are some cost concerns with that, too.

DG: So there’s actually one more C. 

We’ve heard about possible hospital mergers, certainly hospital systems buying up physician practices. We know physician practices, lots of them are struggling right now because they don’t have people walking in the door. What have insurers seen on that front so far?

LB:  I think they’re worried about it. It came up in multiple conversations. I don’t think any of them said that they were seeing those actions being taken, but they were willing to do things to provide assistance to the physician practices, either in helping them apply for federal money, paying them for various services in advance, trying to pay claims much quicker to move liquidity to them and to help them in ways that would forestall that kind of change. 

DG: These acts of goodwill — waiving COVID-related costs, offering grace periods to help employers or consumers pay their premium, providing loan assistance to struggling practices — were possible because insurers had not been hard hit by the pandemic. 

KL: Issuers were really trying to think about how best to use their financial situation to make sure that providers were staying viable. But it wasn’t lost on us that much of this was done for business reasons, too. They need their block of business and the employer market to stay stable, they need to stay in the good graces of policymakers by making sure people get in for their treatment easily. 

DG: Last question: when it comes to the larger policy picture around COVID, what would they like to see going forward?

LB: I think we got a number of reactions from different insurers on this. Number one, there needs to be a safety net to catch people when they lose their private health insurance coverage. And that the notion of there being a pandemic with millions of people without any insurance coverage at all is really highlighting a major public health problem. Another issue that came up that is the issue of pricing and how variable it is. Medicare, Medicaid are paying about one hundred dollars a test generally for a COVID-19 test. And some private providers are charging or are charging commercial insurers that as well. And then others are charging commercial insurers a thousand dollars for the same test. 

DG: Linda, Kevin, thank you both for taking time to talk with us on Tradeoffs. 

LB and KL: Thank you very much. Thank you.

DG: I’m Dan Gorenstein and this is Tradeoffs.