COVID-19 Mortality Spike Hits Insurers

The pandemic death rates have exceeded even the most conservative projections for some insurers.

By John Hilton

There was an expectation by life insurers that COVID-19 deaths would decline as vaccination rates increased throughout 2021.

That has not happened.

In a shocking twist, mortality rose sharply, and many insurers are recalibrating their actuarial projections.

“Based upon our analysis of [Centers for Disease Control] national data, there has been a 40% increase in death rates for individuals age 18 to 64 years old across the U.S. when comparing Q3 2021 data to pre-pandemic data from the same period in 2019,” said Jonathan D. Neal, spokesman for OneAmerica.

The impact for OneAmerica totals more than $100 million in group life insurance and disability claims for 2020 and 2021, Neal added — roughly $35 million and $80 million, respectively.

“We’re seeing right now the highest death rates we have ever seen in the history of this business,” J. Scott Davison, the CEO of OneAmerica, said during an online event last month.

Life insurers projected higher losses from the COVID-19 pandemic but were caught off guard by the latest mortality data. Nearly everyone was.

In April 2021, Fitch Ratings wrote that it “expects pandemic-related mortality claims to decline in 2021 due to the global rollout of vaccines. This assumes that virus variants will not diminish the effectiveness of the vaccines.”

As of press deadline, the U.S. had recorded more than 832,000 deaths attributed to COVID-19. Centers for Disease Control data shows overall deaths spiking to 145% of 2019 levels during the third quarter of 2021.

The CDC lists COVID-19 as the cause for 50,600 deaths in third quarter 2021.

Not As Much Impact

Foresters Financial sells a variety of individual life insurance and annuity products. It is a different product mix and a different market than OneAmerica, noted Matt Berman, president of Foresters’ U.S. life insurance division.

While acknowledging that a 40% mortality increase is “stunning,” Berman reported a different picture at Forresters.

“We’re not experiencing that type of mortality,” he said, declining to divulge specific numbers. “But I will say that we have certainly experienced an uptick in mortality.”

The data is certainly concerning in the bigger picture, Berman added.

“I’m always concerned about the business we underwrite,” he said. “We are a long-term financial services operation. We underwrite promises today, and we have to be certain that we're alive and thriving years from now to deliver on those promises.”

The obvious major difference from group life insurance offered by OneAmerica and individual life insurance is in the underwriting, Berman explained. Foresters is usually including blood and fluid testing in its underwriting.

“We also underwrite business on the nonmedical basis, and that means that we're not utilizing blood and fluid from the individual applicant,” Berman said. “We're using other databases, and we price for that presumed mortality slippage.”

One of the things life insurers are doing in the age of COVID-19 is sharpening the underwriting process to better identify risk. While insurers are not requiring or asking about vaccination status, they have added other questions to the application process.

“The questions we inserted at the outset

of the pandemic, we asked, ‘Are you currently experiencing any flu-like symptoms at the moment?’” Berman noted. “We asked about travel. They were questions that were trying to appropriately underwrite the risk.”

180%

160%

140%

120%

100%

US CDC Deaths — Age 18 to 64 2020 and 2021 as a % of 2019

129%

107% 121%

125% 145%

126% 127%

80%

60%

Q1 Q2 Q3 Q4 2019 2020 2021

SOURCE: OneAmerica graphic representing reported data of US death rates (age 18-64) as provided by the CDC.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john. hilton@innfeed back.com. Follow him on Twitter @INNJohnH.

Health Insurers Ponder ‘No Surprises’ Impact

What’s next for a law to ban most unexpected medical bills.

By Doug Bailey

Alaw to ban unexpected medical bills that took effect on New Year’s Day sounds simple enough. But like many things out of Congress, the details are complicated.

There are questions about how the “No Surprises Act” will be calculated and enforced, and there already have been several lawsuits filed seeking to change or eliminate elements of the complex legislation.

Surprise medical bills have become so common, according to studies, it’s a wonder anyone is really shocked these days. The Kaiser Family Foundation says surprise medical bills number in the millions each year, and two in three adults say they fear unexpected charges when they obtain medical treatment.

The surprise bills typically occur when a patient seeks emergency treatment and has to rely on out-of-network providers that they did not choose. A Department of Health and Human Services report said patients can get clobbered with more than $1,200 in average unexpected charges for anesthesiologists, $2,600 for surgical assistants and $750 for birthing charges.

But anecdotal stories abound about people getting tagged with unexpected emergency services totaling tens of thousands of dollars that they never saw coming.

The new law aims to end such incidents. In what has been called one of the biggest consumer protections ever passed by Congress, when a patient receives emergency care or scheduled treatment from physicians and hospitals outside their insurance networks, they can only be charged for the in-network costs. The new rule applies to employer-based private health plans and to individual policies bought through the Affordable Care Act exchanges. Medicare and Medicaid already ban such charges.

The law covers most hospital, urgent care, free-standing emergency departments and air ambulance services. But perhaps most notable, the law does not cover ground ambulances, which frequently are a source of surprise charges. The law also covers nonemergency care in some situations, such as when an out-of-network anesthesiologist, surgeon or radiologist is ordered by in-network physicians.

In those cases, consumers would be responsible only for their in-network deductibles, coinsurance or copays. Should a patient choose care from an out-of-network source, the provider would have to give estimates of the charges at least 72 hours in advance, and the patient would have to pre-consent to the higher out-ofnetwork costs.

CBO: Insurance Premium Cut

The Congressional Budget Office says the new law will cut insurance premiums by anywhere from 0.5% to 1%.

But who pays the balance of the charges and how the costs are calculated were the biggest sticking points to the law’s passage. And they remain controversial. The insurance industry lobbied to calculate payments on locally negotiated rates, arguing that surprise billing has exploded recently as private equity firms overtook physician groups and hospitals merged and consolidated services.

Providers and networks, however, called for negotiated prices or mediation, contending that fixed prices would lead to federal rate setting and take away incentives for insurers to contract for services.

The final law employs a system in which insurers and providers negotiate and turn to independent arbiters if they cannot resolve their differences.

The American Hospital Association and the American Medical Association have gone to court challenging the interpretation of the balance payments, saying they unfairly benefit the insurers.

The associations said the process will reduce access to care by discouraging meaningful contracting negotiations, reducing provider networks, and encouraging unsustainable compensation for teaching hospitals, physician practices and other providers.

“If regulators don’t follow the letter of the law, patient access to care could be jeopardized as ongoing health plan manipulation creates an unsustainable situation for physicians,” said AMA president Gerald E. Harmon.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.

Help Your Clients Protect Their Social Security Benefits

PlanGap is pioneering ways to empower advisors to solve the largest unaddressed fear in retirement planning.

David Duley, Founder and CEO of PlanGap, knows firsthand the feelings of frustration and helplessness that result when broken promises destabilize a family’s financial well-being. Growing up in Flint, Michigan, David experienced the devastating effects of General Motors declaring bankruptcy, closing their factories, and laying off 90% of their workforce. Today—with the Social Security Administration warning that by 2033 they’ll only be able to pay 76% of promised benefits, and independent research consistently finding that Americans’ #1 concern in retirement planning is that their promised Social Security may be cut—David is on a mission to ensure that, unlike the families in Flint, retirees and pre-retirees have the solutions and information they need to take control of their financial success in retirement. In this Q&A, David not only shares more on the solutions PlanGap is building, but also, as an exclusive debut for INN readers, he introduces a new powerful diagnostic platform that will drive conversations and lead generation in 2022 and into the future.

Q: To start, what does PlanGap do? A: I’ll begin with the big picture. Study after study finds that there are four major concerns in retirement planning: Will I outlive my savings?, Will my Social Security be reduced?, Will I have a health impairment?, Will I be able to leave a legacy to my children and grandchildren? Annuities and life insurance have been wonderful solutions to address concerns about outliving savings and leaving a legacy. Two decades ago, the industry began adopting long term care solutions

that address health impairment concerns. PlanGap is bringing the next generation of living benefits to the life and annuity market to further address the top remaining concern in retirement planning: the fear that Social Security will not be able to pay retirement income in its full and promised amount. We are laying the foundation so our industry can be the first to lead with a solution.

David Duley, founder and CEO of PlanGap

Q: What goes into laying that foundation? A: I look at it as three different but complementary lines of work. First, we develop life and annuity products that offer the industry’s first triggered benefit if your income from Social Security is reduced by a government mandated rule change. PlanGap made insurance history by launching the benefit as part of a fiveyear multi-year guaranteed annuity (MYGA) in 2020. Then, in 4th quarter of 2021, we announced an exciting partnership with North American, an A+ carrier, and Annexus, the premier designer and distributor of retirement solutions. Together, we introduced a highly competitive fixed index annuity (FIA) that features PlanGap’s proprietary

Social Security Protection.

Second, we partner with the best distribution groups to bring these solutions to the market. Third, we’re building tools for our carrier, distribution and agent partners that empower them with resources to educate their clients about the financial challenges facing Social

Security and how to prepare for the possibility of reductions to their Social Security income.

Q: Congratulations, it’s wonderful to see that kind of innovation happening in a life and annuity industry that can be, how do I put it, stale? A: [Laughs] Thank you. What I’m most proud of is that we’ve been able to bring captains of the insurance and finance industry to the table to begin tackling this enormous gap in retirement planning. Milliman has been an integral part of our product development process. Annexus and Ash Brokerage have been tremendous partners and early adopters in helping us introduce PlanGap Social

Security Protection to advisors. Then, there’s the entrepreneurial carriers, American Life and North American, that we worked with to develop our first products. Together, we’re bringing solutions to the market to help clients worry less about the “what-ifs” when it comes to their Social Security income in retirement. That’s why I’m excited to debut today with your readers our latest tool and that’s the PlanGap Social Security Risk Score.

Q: A score, meaning I could see how at risk my Social Security income is? A: Exactly. The government is warning that by 2033 they’ll only be able to pay 76% of promised Social Security income, so mathematically they are going to have to change the rules. One potential fix would be to start means-testing Social Security and as a result high-earners would see their income from Social Security reduced. It would be similar to how if your income was over a certain level, you didn’t get the COVID stimulus checks. I’ve talked with advisors who immediately dismiss that their clients are at risk of reductions, but when I bring up means-testing, many agree that could happen to their clients. Advisors need to change their thinking and accept that due to the shifts in political power, there is real risk to their clients. Until today, if a client asked their advisor how susceptible they are to reductions in Social Security income and how at risk their retirement plan is to a reduction in Social Security income, that advisor would have no answer tailored to that individual’s situation. Today, that changes. For the first time ever, PlanGap is providing a tool that empowers advisors to help their clients manage their unique risks. It’s a gamechanger.

Q: Explain more why it is a gamechanger. A: The advisors I talk to are passionate about helping their clients plan for the future so that they can be successful on their own terms. However, the ways that the government may decide to change Social Security’s rules is outside their clients’ control. The narrative that politicians will act in the best interest of the Baby Boomers is becoming obsolete.

Politicians vote in line with their largest and most powerful constituencies, and more and more those are the younger generations. Advisors need to consider the significance of what a reduction in Social Security would mean to their clients’ retirement plans. For a twoearner household in good health and who had above median income in their working years, Social Security is promising to potentially provide over $1.5 million in income. In this interest rate environment, you’d have to write a serious check to purchase an annuity that generates that kind of income. So, we think it’s important that agents educate their clients on just how big of an “asset” Social Security really is. People want to protect their largest “assets”—think home insurance, car insurance, health insurance. You look at some retirement planning software, and you see scenarios where an advisor showcases a 95% chance of the plan succeeding, and then you model in a 24% cut to Social Security in 2033, and suddenly that plan’s chance of success is less than 50% — essentially, a coin flip.

Q: A coin flip? That’s alarming! A: We need to give people a way to protect their promised Social Security income so that their retirement peace of mind is not used as a political football.

Q: So, the PlanGap Social Security Risk Score is personalized? A: Everyone reading this can see for themselves. Take the quiz to see your own PlanGap Social Security Risk Score. You’ll see how your score is calculated based on your personal situation and the risk factors unique to you.

Q: I’ve really enjoyed our conversation, but I’m anxious to wrap this up and see how at risk my Social Security income may be. A: Look, you’re not alone in being concerned your promised Social Security income may be at risk. It is a massive unknown lurking over all our retirement plans. It’s what makes the PlanGap Social Security Risk Score so powerful. Advisors can access it to educate and attract the millions of retirees and pre-retirees that are looking for answers and solutions that help them gain control. This will be the most effective tool for lead generation and retirement planning in the year 2022 and beyond. Start using it for free today, and what you’ll find is that by offering clients a way to assess their risk and protect their hard-earned Social Security income, you’ll stand out from the competition and your practice will grow.

Go to RiskScoreAdvisor.com TODAY. Get your FREE score and see how it will revolutionize how you do business.