What matters for the insurance industry?
BY MICHAEL GIUSTI
More than perhaps any other vaccine, the COVID-19 vaccine has drawn passionate responses from nearly every corner of the political arena. But in all the high-volume conversations about the vaccination, few people have been discussing the impact it may have on insurance premiums, both today and down the road.
The most prominent public conversation about the vaccine and insurance came when Delta Airlines announced it was going to impose a COVID-19 surcharge to its unvaccinated employees. That announcement came in the days following the Food and Drug Administration’s full approval of the Pfizer vaccine. Delta’s surcharge is being billed as a way to offset the immense costs to treat hospitalized coronavirus patients.
Those costs can be astronomical — with a typical COVID-19 hospitalization costing an insurer $20,000, with intensive care units costing many times more than that.
And while a ton of ink has been spilled over Delta Airlines, a higher-level look at those surcharges is in order, as well as potential impacts vaccination status could play on other types of insurance in the short run, but also down the road.
To start, the Affordable Care Act is clear about one thing — charging similar people different rates based on their health history is forbidden. Tobacco surcharges are allowed, but that is only because they were written into the original legislation.
So, as long as a health insurance plan is regulated by the Affordable Care Act, vaccinated and unvaccinated people must pay the same premiums, deductibles, and other costs for care to stay in compliance with the law.
To get around this prohibition, employers are using a few precisely worded tricks to impose COVID-19 surcharges.
The first way they are maneuvering around the ACA prohibition is by classifying the surcharges as part of their wellness programs. The idea is that once you get the vaccine, you have taken a step toward wellness and the surcharge that is being charged to everyone can be waived for the vaccinated employees.
Similarly, some employers are leaning on language from the Equal Employment Opportunity Commission, which gave a ruling earlier in the summer specifically allowing “incentives” for vaccinated employees.
And while most employers interpreted incentives to be a $25 gift card, or some similar perk, others have suggested that waiving a COVID-19 surcharge could qualify as an incentive.
The catch with relying on the EEOC ruling is that some readings of the ruling say that it prohibits “coercive” incentives. Arguing that a $2,400 annual fee isn’t coercive may be a tough sell.
Another tack to justify the surcharges is defining the surcharges within the confines of the employee assistance program. The departments of Labor, Health and Human Services, and
Treasury offered a roadmap of sorts for housing surcharges within the employee assistance program, but those involved several caveats, such as saying that the incentive could not be limited to employees participating in the health insurance program.
Regardless of the legal rationale, given the political temperature surrounding the COVID-19 vaccine, any effort to push employees to get a jab will likely end up in court sooner rather than later.
Speaking of court, however, one vaccine question is clear regarding employment, and that is that employers are more than free to mandate the vaccine as a condition of employment. That is thanks to a federal court ruling earlier this summer that said a Houston hospital was within its rights to fire employees who refused the jab.
Moving forward, the big picture question about the effect COVID-19 will have on health premiums is more likely to involve a return to normal health care patterns, rather than the cost of treating COVID-19 patients.
During the lockdowns of 2020, and to a lesser extent moving into 2021, many people who would have benefitted from medical care for conditions such as diabetes, hypertension, and the
like, steered clear of the doctor’s office causing a two-fold ripple. First, without those routine care visits, insurance payouts were skewed. And second, without that necessary care, those patients may now be facing higher costs to treat as their conditions worsened.
How those factors will play into premiums will be the bigger story moving into 2022.
COVID-19 vaccines save lives, but does that mean that vaccinated people will pay less for their life insurance? That is going to be a question for the actuaries and state regulators and will likely not be answered for years to come.
In the short run, life insurers aren’t adding vaccination status into their underwriting formulas. The data for how vaccines impact longevity just isn’t there on a long enough time horizon.
That said, COVID-19 has left its fingerprint on the life insurance industry, specifically in how insurers approach the in-home paramedical exam.
During the 2020 lockdowns, many insurers decided to forego those in-home visits and many instead looked to some automated processes involving big data, medical records and other no-touch underwriting techniques.
Coming out of the lockdowns, many have continued to offer those options, as well as offering simple no-exam policies.
If a prospective policyholder had recently contracted COVID-19, or if they lived in or traveled to an area with a particularly bad outbreak, insurers tacked on waiting periods before those policies took place. But after those 30-day waiting periods ended, those patients were just as eligible for a policy as anyone else.
Some insurers have stopped writing some policies for some older patients, regardless of vaccination status, though.
If vaccines do end up influencing long-term longevity patterns, it would be perfectly legal, and really the responsible thing to do, for insurers to consider vaccination status as part of the underwriting process. But for that data to shake out from the background statistical noise, it will be years for a clear picture to emerge. One thing regarding life insurance and the COVID-19 vaccine is absolutely certain, though, and that is that if someone takes the vaccine, they will under no circumstances lose their payout benefit. This emerged as a viral claim on social media where someone claimed their relative was denied a life insurance payout when they died after having received the vaccine.
While that claim is obviously preposterous and has no truth to it, it is important for people in the insurance industry to know about the existence of that misinformation and be prepared to counter it with valid information.
For insurance companies, the biggest issue may not be managing the numbers, data, and analysis regarding COVID-19 vaccines and their impact on pricing, but instead it will be more of a public relations crisis of managing the overheated political rhetoric coming from both sides of the issue.
For some policies in the short run, such as travel insurance, vaccination status may emerge as a pricing factor. But for the longer-term policies, such as health and life, regulators are going to want to see hard numbers and sound rationale before authorizing rate increases based on vaccination status.
As a rule, the more an insurer can rely on data and evidence, the better position they are going to be in when they need to make policy, request pricing changes, and write new contracts.
MICHAEL GIUSTI, M.B.A., is a senior writer at InsuranceQuotes.com.