State of Coronavirus and Insurance Report: Part III
Spring is around the corner and vaccines are beginning to find their way into people’s arms. While things aren’t back to normal, they are beginning to move that way. And the same goes for the insurance industry.
The COVID-19 pandemic posed numerous challenges to insurers and policyholders. From events cancelation and travel insurance confusion to challenges underwriting and pricing new policies, the pandemic threw obstacles in the way of insurers that are only now beginning to be cleared.
This report will aim to detail some of the ways things are returning to normal as well as many challenges that still stand in the way.
Challenges for Extending Unemployment Insurance
When the pandemic sparked shutdowns across the economy, businesses nationwide had to shut their doors, and in many cases lay off their work force. Those workers looked to their oftentimes anemic state unemployment payments to help bridge that gap.
Because most state systems paid dimes on the dollar of what employees used to earn, Congress authorized a boost in those checks as part of the CARES Act. When that money ran out, former president Donald Trump tapped into some FEMA money to offer less generous subsidies to help bridge the gap. And then in January, Congress again authorized a $300 federal boost that is scheduled to expire in March.
Now, congress and the President Joe Biden administration are negotiating yet another stimulus bill, which would, among other things, authorize an extension of federal unemployment subsidies – to the tune of $400 per week until at least August. There is no final legislative language yet, but lawmakers hope a final bill can be passed by early March.
And while workers would welcome the additional federal aid, the big unanswered question regarding unemployment insurance is what is going to happen to the state unemployment insurance trust funds.
Unemployment is a state program – not a federal program, and the vast majority of the funds for the weekly unemployment payments are coming from state coffers – funds originally seeded by payroll taxes on state employers.
Most of those trust funds are running out of cash, if they aren’t empty already. If the states are left on their own to replenish those trust funds, most statutes require businesses to pay an increase in their payroll taxes, putting a huge drag on already struggling employers.
While the stimulus bill that is currently being negotiated does include aid for state and local governments at this point, no money is specifically set aside to help soften that blow.
Business Insurance Claims Are Still Lagging Behind
When the pandemic hit, businesses across the country looked to their business interruption insurance policies to help recoup the revenues they lost due to forced government shutdowns. Most of them were disappointed.
Business interruption insurance typically requires physical damage to their premises before kicking in — not to mention many had specific pandemic exclusions. But many of those owners did not take that lying down. Many owners, including some high-profile restaurants, sued their insurers hoping to compel them to pay out despite the policy language seemingly precluding a claim.
Others took to lobbying their legislatures. Both state and federal bills have been introduced with the intention of compelling business interruption policies to cover pandemics. But courts and legislatures work slowly, and there have not been any notable resolutions just yet, but lobbyists for both the insurance industry and the business owners are watching these cases move forward with great interest.
For their part, the insurance industry says that losses due to pandemics would be so astronomical that they could only be covered if there is a system set up similar to the Terrorism Risk Insurance Act where the federal government acts as a backstop for catastrophic losses.
There is a bill pending in the House that would set up just a system, but it remains to be seen if it will move out of committee.
Travel Insurance Is No Longer an Option
In the early days of the pandemic, travel got turned upside down. Many destinations just shut down. Today, you can again begin to travel, and so travel insurance is once again an option.
But travel is still limited — many places are requiring quarantines once you get there. Others are requiring that you provide proof of a negative test as a requirement for traveling.
And while it is back up and being offered, travel insurance was initially thrown into major turmoil by the pandemic. In the outset, there were questions as to whether delays or cancelations due to the virus would be covered because many of the policies had language excluding both communicable diseases and “known events” which the coronavirus quickly became. Then when international travel shut down, many travel insurance policies shifted their coverage away from medical and more toward cancelations.
Now, with travel policies again to be had, and even ones that specifically cover COVID-related travel interruptions, shopping for travel insurance is again possible. Trip insurance can cover cancelations, delays, missed connections, lost luggage, and even medical treatments.
When you are buying a policy today, it is important to specifically ask how COVID is being handled. Some policies are specifically covering it. With others, it can be ambiguous.
It is also important to ask about the medical coverage if the trip takes you out outside the United States where your health plan may or may not continue to cover you. One related common travel insurance benefit is medical evacuations, which will help cover the cost to take you to the nearest high-level medical facility if you fall seriously ill in a location that can’t handle your care. Medical evacuations can get very expensive very quickly, so especially with the pandemic question marks still around, it is more important than ever to make sure you are covered.
Do know that cancelation coverage is only for things outside your control – not for fear of travel. For that, you need cancel for any reason coverage, which is again available, but just as before the pandemic, comes at a much higher cost than plain trip cancelation policies.
And as vaccinations become more ubiquitous, it is likely many locations will require proof of vaccination before you would be welcome to travel there – a so-called vaccine passport. But for now, each jurisdiction is going to have specific requirements that you would do well to thoroughly research before booking a trip.
Health Insurance and COVID-19 Vaccines
One bright spot from the CARES Act passed last year is that COVID vaccines are generally covered at no cost to the patient, with a few question marks. When it comes to Medicare, Medicaid, CHIP, and other federally provided health plans, there is no question; the shots are offered at no cost to the patient. If the patient has an Affordable Care Act-compliant policy, again, vaccines would be covered at no cost to the patient.
The question mark comes in when someone has a plan that is grandfathered in under the ACA, or that is not regulated, such as a short-term health insurance plan. In some cases, states are requiring those plans to cover the costs of the shot, but others may not.
Thanks to federal regulations, uninsured patients will also have access to no-cost COVID vaccines as long as the pandemic is a declared national emergency. Health care providers just need to apply for reimbursement from the federal government.
But one potentially problematic area for uninsured patients is the very rare instance where someone might be on the hook financially if they are uninsured but have a severe vaccine side effect.
That is because under federal law, you essentially can’t sue anyone for vaccine side effects. The vaccine manufacturer is protected by a liability shield, and the FDA can’t legally be sued for approving the vaccine. Your employer likely can’t be sued for making you get vaccinated either. Luckily severe side effects are exceedingly rare.
Vaccine coverage aside, moving into 2022 health insurance premiums are going to be a challenge to properly price. That is because since so many people deferred preventative care, the industry is likely to be faced with a flood of claims later this year as people become more comfortable with leaving the house.
Still other people will be suffering from worse overall health because they didn’t take care of those preventative procedures, which might also lead to higher health care costs in the long run. Those factors will both be on insurers’ – and regulators’ minds when it comes time to set rates again later this year.
Defining What Liability Is in 2021
One other area business owners, as well as schools, venues, and really anywhere that people gather are looking for federal intervention this year is in the form of a liability shield.
Senate Minority Leader Mitch McConnell had strongly lobbied for such a liability waiver during stimulus negotiations late last year, but no such language was adopted, and it is also not included in the current federal stimulus proposal.
Because there is no federal liability shield, if someone gets sick at work or at school, liability likely comes down to state rules and best practices. If someone can prove they got sick at work, it is likely that workers’ compensation would kick in. In the case of a customer, liability policies would protect owners from a lawsuit.
Owners who are worried about getting sued would do best to follow published best practices from the CDC and follow all applicable state and local regulations regarding how they should operate. Some states have specifically shielded businesses, but others may not have.
A Good Time to Get Life Insurance
Life insurance was mainly impacted by COVID-19 because of lockdown orders that made paramedical exams used for underwriting impossible. Since nurses couldn’t go to applicants’ houses, they couldn’t get the health information needed to properly price the policies.
Many companies switched to no-exam options. The problem with that, though, is that premiums tend to be higher than if the insurer has access to accurate underwriting data. Some are still offering those no-exam policies. But many are getting back to the traditional in-home paramedical exams if they are allowed in the local area the policy is being purchased.
Some policies put temporary restrictions on some age groups – say older than 70. Others put in restrictions that if you traveled to a COVID hot spot you had to go through an extended waiting period until after the policy kicked in.
Still, the good news is that term life insurance prices are at historic lows and remain a tremendous deal compared with historical prices.
Other Types of Insurance Policies
Early in the pandemic, people stopped driving, and fewer miles driven led to fewer auto insurance claims, which led to lower insurance premiums. Some auto insurers responded by lowering premiums. Others sent rebate checks.
But, as people have begun to travel and commute again, those breaks have also begun to expire.
If people are working from home now instead of commuting, this may be a great opportunity to try a telematics device. Those are devices that the insurance company sends to you that you insert into your vehicle’s diagnostic port. They monitor things like hard stops, fast acceleration and how late you drive. They use those factors to offer discounts to lower-risk drivers.
If you are commuting to your living room instead of an office building, those fewer road miles may translate to lower auto rates.
Working from home may also pose a challenge for homeowners’ policies. Just telecommuting is no problem, but if working from home means that customers are now visiting your house, that may translate to higher homeowners’ rates, or even specific exclusions put in place by standard homeowners’ policies. Make sure to communicate with your insurer if you are now seeing customers in your home, because if you neglect to tell them and then someone slips on your welcome mat, you may be sued without liability coverage.
The Way Forward for Insurance
The coronavirus wasn’t the only thing hammering the insurance industry in 2020. From a record hurricane season to wildfires raging through the Western U.S. — not to mention damage from civil unrest and some violent tornados, the insurance industry took some major losses.
With those losses, policy premiums will likely go up for many lines in the near future.
Looking ahead, legislators and the courts may still have a huge role to play in how the industry unfolds. And if there was a question about whether pandemics would be covered or not, any new policy written from here on out is sure to specifically address it head on.
But all of that is a small price to pay for life getting back to some semblance of normal in so many other areas.
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