State of Coronavirus and Insurance Report: Part II
With 2020 dominated by the coronavirus pandemic, it is hard to believe that a new year is nearly upon us, but time continues to march on. And while the Coronavirus is likely to still be around for a while in 2021, there are plenty of potential changes that may come when the clock strikes midnight for the last time in 2020.
Great progress is being made on a potential vaccine, a historic election will be behind us, and we will have clarity for what has happened with the dreaded pandemic’s second wave (or third, depending on how you are counting).
On the coat-tails of the first installment of the State of Coronavirus and Insurance report released earlier this year, our new report aims to lay out what those changes might hold and offer some insight into what 2021 might have in store in the realm of insurance.
Health Insurance in the Time of COVID-19
The Affordable Care Act has set the ground rules governing health insurance for over a decade. But in November, that underlying law is going to be put to the test. A coalition of state attorneys general has banded together to challenge the legitimacy of the law, and that case is scheduled to come before the Supreme Court in November.
With the Senate deep in confirmation hearings for the replacement for the late justice Ruth Bader Ginsburg, it is anyone’s guess how the court is going to rule in this case.
Many people in the health care industry say the underlying lawsuit challenging the Affordable Care Act stands on shaky legal grounds, but a federal judge has already ruled that the law is unconstitutional, so even if the Supreme Court does nothing, the law will fall, leading to massive uncertainty in the health care market.
Presuming the Supreme Court doesn’t overturn the lower court ruling and allows the Affordable Care Act to go away, a clock will begin ticking for Congress and state regulators to come up with something to replace it. That is because by the time any court ruling comes down, health insurance contracts for 2021 will have already been written using Affordable Care Act guidelines, and they will be in force for the entire policy year.
However, when it comes time to renew them, all sorts of popular provisions will no longer be legally required — everything from protecting preexisting conditions, to mandating that children can stay on their parents’ policies until they are 26, to mandating that preventative health screenings be covered and eliminating lifetime and annual caps on insurance coverage.
Depending on who wins the presidential and Congressional races in November, what would replace a struck-down law could look drastically different.
Even if the Affordable Care Act is not tossed out, that doesn’t mean all will be clear in the health insurance world. That is because the health insurance industry is already straining under the pandemic, and if another wave of infections crashes across the country as the weather turns cool, those challenges could be amplified.
The main challenge is that since so many people stayed home this year rather than taking care of preventative health screenings and elective surgeries, such as hip replacements and diabetes screenings, health insurance actuaries are struggling to project what costs will be in the coming year.
That is partly because premiums are based on the prior year insurance spending, and with such a crazy year in 2020 to base prior spending on, premiums could be very unpredictable when policy renewals come up. There are also the potentially higher costs that might be coming because people weren’t taking as good care of themselves during lockdown.
One cost that is relatively predictable is what consumers will have to pay to get a COVID-19 vaccine whenever one is eventually released. Presuming the patient is covered by an employer-provided health plan, or a state marketplace plan, or even Medicare or Medicaid, that vaccine will be available at no extra cost thanks to a provision of the Affordable Care Act.
If someone is uninsured, their out-of-pocket expense will depend on which vaccine is eventually approved, but could be as low as $30 per dose, with others potentially costing much more, depending on which one is eventually approved.
Unemployment Insurance and the Pandemic
With government mandated shutdowns, businesses ended up taking huge financial hits, and many were forced to lay off at least some portion of their work force. Those unemployed workers had to turn to state-run unemployment insurance in an attempt to keep their head above water.
Initially, the federal government stepped in and supplemented those state payments with a $600 weekly payment, which in many cases was more than double, or even close to triple what they would have otherwise received.
Those funds expired late last summer, and President Donald Trump signed an executive order to replace those supplements with $300 matchable payments from a Federal Emergency Management Agency disaster fund. Those funds have also since dried up.
Any further aid is going to have to come from Congress, and that is not likely until after the November election. Depending on who wins, workers can expect drastically different approaches, with Democrats favoring the higher unemployment supplements, while Republicans favor the smaller ones, hoping that they would not serve as a disincentive for workers to return to their jobs.
The other major issue facing unemployment insurance in 2021 is how the states replenish their dwindling unemployment trust funds. Those funds are typically paid through fees charged to employers. When the funds dwindle, there are often automatic fee increases and reductions in benefits.
States facing these automatic triggers will surely look to Congress to help shore up their finances so the burden of replenishing the funds doesn’t fall on already struggling businesses, but again, any solution will likely have to wait until after the election.
Business Insurance Redefined… or Not
When businesses were interrupted by the pandemic, most looked to their business interruption insurance policies to help recoup some of those lost revenues. Most were disappointed with the answers they received.
Business interruption insurance typically relies on physical damage to a business before it is triggered. Many businesses, including several high-profile restaurants, are arguing in court that the virus damaged their air, but insurers aren’t buying that explanation for now. Court cases will undoubtedly take years to resolve.
In the meantime, many state legislatures and U.S. congressional representatives have floated the idea of a legislative fix, compelling insurers to cover pandemics. But, again, no movement on any of those bills would be possible before the November election.
Another interesting question for business insurance moving forward is whether pandemic exclusions are going to start popping up in other types of coverage, such as business liability insurance to keep a company from having to pay a claim in case a customer or employee contracted the virus on their premises.
Liability Insurance for Schools and Universities
When schools started opening back up in August, everyone held their breath and watched to see how things would turn out…
Some universities had major outbreaks and were forced to shut down shortly after reopening. Others, however, have managed to muddle through a fall semester using a combination of hybrid, online, and in person learning, as well as various tracking and testing plans to beat down outbreaks as they popped up.
Many went so far as to cancel breaks and even end their semesters early so students don’t have to return after the Thanksgiving holiday, where they might have been exposed by travel and family.
K-12 schools have also had mixed results. While there have not been many widespread outbreaks reported, there have been some high-profile deaths among teachers and educators, and most schools regularly send out notices that one of their classmates has tested positive.
With those mixed results, some people are feeling braver and are sending their children back in person, while others are opting for virtual learning to mitigate risk.
The interesting insurance question is going to be how those re-openings affect policy premiums when the schools renew their liability insurance. Congress has also discussed passing liability shields to protect schools if they reopened in person, though again, all legislation seems to have stalled out until at least after the election.
The Changing Face of Travel Insurance
One early insurance confusion during the pandemic was travel insurance. Many people who had purchased travel insurance before the pandemic was declared were able to cash in on those policies when lockdowns canceled their trips.
Other people found that pandemics were specifically excluded from their policies. And other people still found that if they purchased the policy after the pandemic was declared, it was often considered a “known event” and was not covered. Even more people found that fear of travel was only covered if they had opted for the pricier “cancel for any reason” coverage option.
So, more than six months into the pandemic – what has changed?
First, most insurers are encouraging their customers to go ahead and opt for the “cancel for any reason” upgrade. That gives them the most flexibility regardless of what happens. Another change is a result of the lack of international travel.
While many policies previously focused their coverage on the health care option of their plans that was meant to help travelers who left the coverage area of their US-based health insurance, now that is less important since fewer people are traveling overseas. So, as a result, many insurers are shifting the focus of their coverage instead to the trip cancelation portion for domestic travel.
Travelers can still get travel insurance policies, but it is now essential that consumers specifically ask how the pandemic will be handled before they make any purchases. The thing to always keep in mind, though, is that fear of travel is never covered by anything other than a cancel for any reason policy.
So, no matter how scary a destination looks, if flights are allowed, you will not get reimbursed for backing out of your trip without that upgrade.
The other thing to keep in mind is that if you are booking into the future, make sure to include travel insurance as part of your planning process. That is because some policies specifically require you to purchase travel policies within just a few days of purchasing your travel.
If you wait too long, you might lose the option to insure your trip. So, ask the questions and think the whole trip through before making plans and making deposits.
The Rise of Special Events Insurance
Similar to travel and business interruption insurance, special events policies were thrown for a loop as closures swept the globe and high-profile events had to be postponed or canceled.
Large events are protected by special events coverage, but in order to be protected from pandemics, they had to buy a specific rider upgrading their policy. Most events did not do this.
Moving forward, events can still purchase special events coverage, but with some caveats. Insurers are now being much more selective about what they will cover. In many cases, insurers are requiring event organizers to file extensive risk management plans, as well as setting strict rules for how the events can be conducted.
If someone is buying a wedding insurance policy, or a policy for any event they are planning, it is best to specifically ask how the Coronavirus is going to be handled, because at this point, it is what is considered a “known event,” and most likely would be excluded.
But if someone is planning for an event well into the future, after a presumed vaccine would likely be available, then those exclusions might be worth the risk.
Life Insurance with Some Minor Tweaks
Unlike other insurance policies, life insurance was designed to handle pandemics. What it wasn’t designed for was writing new policies during pandemics.
During the early stages of the pandemic, when stay-at-home orders were in full force, insurers were struggling with how to conduct paramedical exams to help determine someone’s risk to price their premium.
In many cases, the insurance companies just waited to write new policies, while others experimented with things like electronic medical records and other no-touch risk management techniques. Now that people are allowed to move around a little more freely, these issues seem to be passed.
Some more good news on the insurance front is that if someone has contracted COVID-19 and since recovered, it appears they are having very little trouble qualifying for new policies. In many cases, though, insurers are requiring them to have an extended waiting period before the policy takes effect in order to ensure they are truly recovered.
And of course, if anyone with a policy in place died of COVID-19, their death would be covered as any other illness would be.
The Way Forward
While the pandemic won’t go away at the strike of new year, with any luck, 2021 will offer much more clarity for the future. The election will be in the rearview mirror, vaccine candidates will be well into their clinical trials, if not ready for regulatory approval, and hopefully, the world can begin getting back to normal.
But, even with a return to normalcy, it is likely that some of the lingering effects of the pandemic will take years to work out, and may stick around in insurance policies in the form of exclusions and policy language long after that.
As always, ask questions, read the fine print, and take the changing insurance landscape into consideration. This ride is not quite over.