GRAND RAPIDS — Citing lower medical claims and utilization rates during the COVID-19 pandemic, Priority Health plans to provide temporary rate reductions to employers and individual policyholders.
The Grand Rapids-based Priority Health will apply a 15-percent reduction to June and July premium bills for small businesses with two to 50 employees, and for individual policyholders enrolled in the MyPriority health plan.
Large group and fully funded employers will receive a premium credit in the fourth quarter, once Priority Health determines the amount of excess revenue available in the health plan beyond the normal margin and administrative costs.
Priority Health’s ability to trim premiums for two months comes from a lack of medical claims for elective and non-essential care that providers halted in late March under an executive order from Gov. Gretchen Whitmer. Care providers also have been reporting that consumers are delaying or not seeking needed care during the pandemic.
“People pay us premiums to get care, and if they’re not getting that care then they deserve to have those premiums back,” Priority Health President and CEO Joan Budden said. “We believe that this is fiscally responsible based on what we’re seeing in trends, and that this is something we can do right now for our members and still be financially stable.
“Small businesses and individual consumers have been particularly hard hit during this outbreak, we hope this relief will make it easier for them to stay covered.”
Priority Health has about 100,000 members enrolled in employer-sponsored small group plans, and 125,000 in individual policies.
Budden could not say how much the temporary rate cuts will affect premium revenues.
In 2019, Priority Health recorded $188 million in net income across all lines of business. The earnings came on premiums revenues of $4.17 billion from commercial, individual, Medicare and Medicaid health policies, $118 million in operating income and higher investment earnings of $69.7 million.
Priority Health opted to offer the rate relief for June and July because that’s probably “when we are slowly returning to work or back to potential jobs, and we thought this was the most immediate thing we could do to help people,” Budden said.
“This is going to provide some financial relief to a lot of people,” she said.
Priority Health also intends to waive all copays until the end of 2020 for in-person and telehealth primary care physician visits for about 200,000 members enrolled in Medicare Advantage plans “so that we can encourage seniors to get the care that they actually need” and without delay, Budden said.
Many health plans have been waiving copays and deductibles for coronavirus testing and COVID-19 treatment. Priority Health is the first health plan based in Michigan to publicly say it will offer temporary rate reductions because of lower medical claims and utilization rates.
Minnetonka, Minn.-based national commercial health insurance carrier UnitedHealth Group said last week it planned to provide premium credits of 5 percent to 20 percent in June for employers with fully insured plans, as well as waive cost sharing through the end of September for primary care and specialist physician visits.
Bob Hughes of benefits consulting firm Advantage Benefits Group Inc. in Grand Rapids expects that other health plans in Michigan will follow suit and offer temporary rate reductions.
“I’m sure you’ll see a response,” Hughes said.
Blue Cross Blue Shield of Michigan, the largest health insurer in the state, said in a statement to MiBiz that it’s looking at how the pandemic is affecting its finances.
“This sounds like good news for Priority’s customers. At Blue Cross, we are taking a disciplined approach to understanding the uncertainty that the pandemic has caused in health care economics. There are many competing models on future health care spending because there are so many unknowns. We are also waiting for some guidance from CMS (the federal Center for Medicare and Medicaid Services) that is critical to us making good decisions, and will be communicating our plans to our customers in the near future,” said Andy Hetzel, Blue Cross Blue Shield of Michigan’s vice president of corporate communications.
While surely welcome, Priority Health’s temporary rate cuts will come with some administrative burdens for employers in terms of adjusting how much they withhold from employee paychecks for their share of the premium, Hughes said.
Dominick Pallone, executive director of the Michigan Association of Health Plans, a trade group for HMOs in the state, said in the COVD-19 pandemic “all health plans continue to spend a lot of time evaluating their financial situation and the needs of their members.” Health plans weighing a temporary rate reduction have to balance the reduced medical claims and utilization rates of the last two months with an expected increase ahead from pent-up demand as care providers resume elective procedures and surgeries, Pallone said in an email to MiBiz.
The situation for health insurers differs from auto insurance carriers, many of which have offered rate refunds or credits during the pandemic because people are driving less because of the stay-home order.
“For some plans, as utilization may be reduced, they are evaluating the extent to which they anticipate utilization later in the plan year,” Pallone said. “Unlike auto insurance where accidents and claims have clearly fallen and expenses are avoided, health care needs are more often deferred rather than completely avoided. So, I know that each health plan is constantly tracking and evaluating their utilization of services by their enrollees.”
Should a spike in medical claims and utilization occur from pent-up demand, insurance premiums are capped for the year under rates approved by state regulators, Budden said. She could not speculate on what may happen to rates for 2021.
Health insurers are due to file 2021 rate plans with state regulators in the next couple of weeks.
“Unfortunately, we file our rates for the next year so early in the season, and we don’t know how things are going to turn out,” Budden said. “That’s in a normal year. In a year like this, that’s a lot of estimating going on.”
EDITOR’S NOTE: This story has been updated with comment from Blue Cross Blue Shield of Michigan.