HEALTH INSURERS CRY UNCLE An unpopular industry turns to Washington for help. by Z A C H W I L L I A M S
ENNIFER M. MASON/SHUTTERSTOCK
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HE BUSINESS MODEL for insurance companies depends on one central dynamic: customers pay more for their coverage than they receive, overall, in benefits. As long as that remains in place, insurance companies make money. Major disasters, such as losses from forest fires, have the potential to rattle the industry. A global economic shock following a deadly pandemic is the type of event with no comparison, for society at large and insurers alike. Companies that offer everything from business interruption insurance to travel insurance are on the hook. “I think it’s going to be horrendous, and I worry about that in terms of New York state in my parochial area of insurance,” said state Sen. Neil Breslin, the Insurance Committee chairman.
One projection estimates that the pandemic will cost health insurance companies between $34 billion and $251 billion this year. Health insurers could also lose a portion of their customer base as employers struggle to stay in business and the ranks of the unemployed grow. In the end, it could be up to federal lawmakers to decide how much the pandemic is going to hurt health insurers. In New York, billions of dollars in future profits depend on keeping millions of people covered. Otherwise, insurance premiums will increase, industry leaders warn. With direct help from the state and federal governments unlikely, health insurance companies are pushing for the federal government to spend billions of dollars to subsidize private health insurance for small businesses and the unemployed. It is a strategy that positions an unpopular industry in a more favorable light as it confronts an array of political and social uncertainties – a nightmare for any insurer. “There’s obviously a range of pressures that are put on the plans,” said Eric Linzer, president and CEO of the New York Health Plan Association, which represents health insurers. “Certainly more
could be done to ensure and maintain the stability of the marketplace.” No one knows how long the pandemic will last. Data shows that more people have been infected with the coronavirus in New York than the next four highest states combined, as of the end of April. The state has tested more than 875,000 people, at least 200,000 more tests than the next closest state, California. Plus, there are the tens of thousands of people who have required hospitalization throughout the crisis. The cost of treating all these people runs into the billions of dollars. Do insurance companies have money to cover all these costs? “Certainly they do,” Linzer said. Insurers have saved money because expensive elective surgeries have been canceled, and customers are pursuing less medical attention during the pandemic for non-COVID-19 treatments. But those temporary reprieves from some costs might not help the industry keep its market share in the coming months. More than 60% of New Yorkers have private health insurance, and 95% of people in the state are insured overall. More than 1.4 million New Yorkers have completed their unemployment benefit applications since early March, and the closure of many small
