What Are Health Plans Doing With Their Q2 Money?

Adam Block, Kevin Van Dyke and Leah Dillard wrote a paper titled “Profits of Publicly Traded Health Plans Surge Amid Requests for Higher Rates” that was posted this week on the MHE website. During the first part of our video interview, Block discussed the financial effects of COVID-19 on providers, the Q2 net operating income of insurers, and the reason providers are struggling while insurers are “rolling in money.” In the second half, Block discussed what insurers are doing with their profits.

With premiums and payments pretty much holding steady and medical expenditures plummeting as elective procedures and other routine medical care came to a grinding halt, health insurers experienced a huge jump in net adjustment income in Q2 of this year. Adam 
E. Block and his colleagues discuss the increase and computed the relative difference with Q2 of 2019 in a paper posted on our website this week. 

So what are they doing with all that money?, we asked Block. 

In some cases they have advanced providers funds, said Block, an assistant professor of public health at New York Medical College of Health Sciences and Practice in Valhalla, New York, in the second half of our interview. In some cases, some providers have, in effect, received Q3 payment Block. 

“But that is not new funds,” said Block. “That is an advance on your salary. It’s not a raise.”

In other cases, insurers have moved to get rid of the normal lag between when a claim is filed and what the money flows to the providers.

The ACA medical-loss ratios of 80% and 85% are perhaps not as much of a factor as one might think, Block explained, because they are computed using a three-year rolling average. Eventually, the Q2 surge in profit might be offset by less favorable quarters for insurers in the future. Even if the medical-loss ratio limits were to kick in, Block says it would be quite some time before any money reaches individuals. “By the time the consumer receives any benefit it will be at least two or three years out.”

Block said he thinks that insurers should use the money to help providers. “Hopefully the plans will help make the providers whole,” he said. “They are ones taking the personal risk and seeing COVID patients.”  

Block and his colleagues wrote in their paper that the ACA market is “confused and inconsistent” as far as rate requests for next year, with some plans asking for very small increases (less than 1%) while Oscar and Fidelis in New York have requested rate increases of 15%. In the video interview, Block echoed thoughts, calling the rate requests “a mixed bag.”