Best’s Commentary: Health Insurers Adjust as COVID-19 Spreads in United States

OLDWICK, N.J.--()--As the COVID-19 virus rapidly spreads in the United States, the risk to U.S. health insurers is compounding in a multitude of ways, according to a new AM Best commentary.

AM Best released a commentary about the potential impacts of the coronavirus on the health insurance industry in early March (see related press release), but given the rapidly evolving situation, is providing additional comments to address the current and still-unfolding situation.

The new Best’s Commentary, titled, “Health Insurers Adjust as COVID-19 Spreads in United States,” states that AM Best believes that health insurers are facing three major types of risks: claims, economic and operational. From a claims perspective, AM Best continues to believe that health insurers will receive an increase in the number of claims related to the virus, as well as an increase in claims severity. A decline in non-urgent claims as individuals may opt to avoid doctor offices and clinics could offset some of the claims impact.

As stated in the commentary, the economic risks to health insurers exist on multiple fronts, including: lower membership and premiums from layoffs, lack of new sales, concerns regarding collection of premiums as well as reimbursements from employers for administrative services contracts, decline in investment income as well as realized and unrealized losses of invested assets.

Operational risk for health insurers is driven by the ability to process an influx of claims and inquiries from its members, although many insurers already utilize work-from-home practices.

AM Best is keeping its market segment outlook for the health insurance industry at stable, although it acknowledges the potential for deterioration in capital from an earnings and investment perspective. However, favorable earnings the past few years have resulted in the strengthening of risk-adjusted capitalization, which should aid in withstanding the financial impact of the coronavirus. Additionally, what would occur should hospital capacity become an issue or if the government intervenes is unknown at this time. AM Best will continue to monitor the coronavirus situation as it evolves and provide updates as warranted.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=295525.

A video discussion with AM Best Rating Services Senior Director Sally Rosen about this commentary also is available.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Bridget Maehr
Associate Director
+1 908 439 2200, ext. 5321
bridget.maehr@ambest.com

Joseph Zazzera
Director
+1 908 439 2200, ext. 5797
joseph.zazzera@ambest.com

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Bridget Maehr
Associate Director
+1 908 439 2200, ext. 5321
bridget.maehr@ambest.com

Joseph Zazzera
Director
+1 908 439 2200, ext. 5797
joseph.zazzera@ambest.com

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com