ONE OF the consequences of the coronavirus outbreak will likely be higher insurance rates coming into 2021, experts are warning.

Covered California, the state-run Affordable Care Act health insurance exchange, warned in late March that the spiraling costs of COVID-19 testing and treatment could result in massive premium increases of between 4% and 40% for public health care exchange policies as well as group health plan policies for the 2021 policy year, if there is no government intervention.

Many factors will come into play, such as costs of treatment, whether the financial stability of insurers is imperiled and if Congress steps up with new legislation to help the insurance industry cope with the surge in unexpected costs this year.

Expected costs

Covered California predicted that coronavirus treatment, testing and care costs for employer-sponsored health plans nationwide would be between $34 billion and $251 billion. Estimated costs for COVID-19 treatment vary greatly depending on the severity of the case. Some people have life-threatening symptoms requiring hospitalization and ventilators to survive, others may require hospitalization and oxygen, while many people may have mild or no symptoms and can be treated on an outpatient basis and quarantined at home.


  • $20,292 for patients with major complications or comorbidity issues (such as diabetes, heart disease or cancer).
  • $13,767 for patients with complications or comorbidity.
  • $9,763 for patients with no complications.

Source: Kaiser Family Foundation
* Averages for employer-sponsored health plans

Many health insurers have agreed to eliminate copays and deductibles for COVID-19 screening and lab tests, and have agreed to waive copays, deductibles and other out-ofpocket cost-sharing for treatment.

Rate fallout

Probably the largest factor affecting rates for 2021 is whether the pandemic spills over into 2021 or it is brought under control. Insurers are prohibited from raising rates astronomically, however, just to make up for excessive costs this year if they do not expect the same in 2021, unless their solvency is threatened.

But if they eat too much into their reserves because of COVID-19, they may have a legal obligation to increase rates so they can build those reserves back up for the next emergency.

Insurers moving to hike rates substantially may also see pushback from state regulators, who may argue the hikes are not justified by expected costs next year. That’s because rates must be based on expected costs.

But if the outbreak is ongoing, expect rates to climb with amounts varying depending on if a treatment or vaccine is developed, as well as any government assistance that may be coming.

Possible assistance

Congress is working on legislation that would offer reinsurance for health insurers that could provide financial support for group health plans, employees enrolled in those plans, as well as consumers who buy their insurance on exchanges.

Health insurance plans are also lobbying Congress to introduce legislation that would help stabilize the market going into 2021. This could include compensation to keep premiums from spiraling, providing support coverage for employees who lose their jobs and allowing them to enroll in the individual market during a special enrollment period.

In their most recent stimulus proposal, House Democrats included a program that would help health insurers cover extreme losses to avoid massive premium hikes.

The takeaway

For now, there is nothing you can do about your health insurance, and there are no moves you should really make at this time. It’s still unclear what kind of assistance the insurance industry will receive and how long the outbreak will last.

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