The National Association of Insurance Commissioners (NAIC) held a special session on Friday, March 20, 2020, to discuss various facets of how COVID-19 is impacting the insurance industry.
Sessions covered included the impact of the coronavirus on the health as well as property and casualty insurance markets and issues related to policies and consumers. Key take-aways from these presentations include:
- The Department of Health and Human Services is waiving or modifying many requirements to improve the speed and efficiency of the delivery of healthcare services.
- States have implemented actions related to limited cost sharing and preauthorization requirements, assessment of network adequacy, expansion of telehealth and prescription access and provision for special enrollment periods to improve availability and accessibility.
- There have been very few immediate solvency issues arising so far.
- Property and casualty insurers are financially strong, with capital and surplus of $800 billion, diversified investment portfolios and sound reinsurance coverages.
- The property and casualty market segment likely to have the highest impact from COVID-19 is workers’ compensation carriers providing coverages to healthcare professionals, first responders, transportation employees and retail employees.
Ray Farmer, South Carolina insurance director and NAIC president, opened with introductory comments including reminding participants that the NAIC has been dealing with pandemics and other national emergency situations throughout its existence. He noted the first time was in 1871 and that since then the NAIC has played a role in dealing with crises such as the Spanish flu, AIDS, the Swine flu and the 9/11 attacks on the United States. While each circumstance is unique, each experience provides knowledge and insight from which to learn valuable information for use in responding to future crises.
Virus progression and pathology
Dr. Jay Butler, deputy director for infectious disease, Centers for Disease Control and Prevention (CDC), then discussed some information about the COVID-19 virus, including its worldwide spread and its pathology. Much of his presentation affirmed the accuracy of the general information that has been presented by the United States media concerning this virus. He mentioned that the first case in the United States was diagnosed on Jan. 21, 2020, and he noted the global spread of the virus has followed normal progression patterns and rates for such easily transmitted infectious diseases. He also said it took a little over two months for the first 100,000 cases of the virus to arise, but the next 100,000 cases arose in just under 12 days. At the end of his formal remarks, Butler fielded several questions, including about why the death rate in Italy was so high relative to other countries, the risk of reinfection once a person has recovered from the virus and when it is safe for them to return to work and public life.
Next, Matt Nielsen, senior director, governmental & regulatory affairs, Maria Lomelo, director of product management, and Brice Jabo, medical epidemiologist, all with Risk Management Solutions (RMS), a catastrophe risk modeling company, gave a presentation on pandemic modeling. This panel discussed RMS’s infectious disease modeling, which it began in 2007. They noted COVID-19 is the second actual pandemic their model has dealt with. They noted that with this virus being unknown until just a few months ago, they are continuously learning new information that feeds into their modeling assumptions and processes. They also demonstrated how measures taken, like social distancing and school closures, slow the overall infection rate (flatten the curve) so as not to overwhelm the medical system and allow time for treatments and ultimately vaccines to be developed.
Impact on health insurance market
Randy Pate, CMS deputy administrator and director, Center for Consumer Information and Insurance Oversight (CCIIO), and Troy Oechsner of Manatt Health discussed COVID-19’s impact on the health insurance market. Pate noted that on March 13, President Trump declared a national state of emergency, which has enabled the secretary of Health and Human Services to waive or modify many requirements as a means to improve the speed and efficiency of the delivery of healthcare services in the face of this pandemic. Pate also noted that the CCIIO has issued several FAQs to offer guidance and clarity to the individual and small group markets.
Oechsner then gave an overview of some of the key state-level actions that have been implemented related to limited cost sharing and preauthorization requirements, assessment of network adequacy, expansion of telehealth and prescription access and provision for special enrollment periods. Looking at the road ahead, Oechsner stated there will be many issues to explore, including whether insurance departments can require — rather than just request — coverages, as well as topics such as coverage for testing versus treatment, premium grace periods, surprise medical bills, non-ACA-compliant products, ERISA preemption on self-insured plans, new vaccine coverage and a fresh look at rates, risk adjustments and reserves.
Financial impact and policy coverage issues
Commissioner Scott White (Virginia), NAIC Financial Condition (E) Committee chair, and Insurance Information Institute (III) executives Sean Kevelighan and Michel Leonard, discussed the financial impact of COVID-19 and related policy coverage issues. White emphasized that very few immediate solvency issues were arising, referencing the Society of Actuaries Research Brief – Impact of COVID-19, released on March 16, to support his assertion. White noted, however, that there are a lot of questions to be answered and that a key factor will be realizing an actual flattening of the curve, pointing out that if the current environment lasts for a longer period of time, asset values as well as interest rates will continue to decline and the economy will be all the more adversely impacted.
Kevelighan, president and CEO, and Leonard, vice president and senior economist, then discussed how they expect COVID-19 to impact the property and casualty market in particular. They noted that property and casualty insurers are financially strong, with capital and surplus of $800 billion, diversified investment portfolios and sound reinsurance coverages. Kevelighan went on to note that while there has been a lot of attention recently on business interruption insurance, he does not expect such claims to significantly upset the fundamentals of the industry.
Leonard noted the segment of the property and casualty market that will likely have the highest impact from COVID-19 is workers’ compensation carriers providing coverages to healthcare professionals, first responders, transportation employees and retail employees. He noted liability and directors’ and officers’ coverages will likely have a moderate impact on carriers providing these coverages to healthcare and pharmaceutical companies as well as to insureds in the entertainment, retail, transportation and manufacturing industries.
Insurer readiness and consumer issues
Susan Neely, president and chief executive officer, American Council of Life Insurers (ACLI); Matt Eyles, president and chief executive officer, America’s Health Insurance Plans (AHIP); Dr. David Sampson, president and chief executive officer, American Property Casualty Insurance Association (APCIA); and Sarah Lueck, NAIC consumer representative and senior policy analyst, Center on Budget and Policy Priorities, participated in a panel discussion on insurer readiness and consumer issues.
They emphasized that insurers are being diligent in helping their policyholders and their communities during this crisis. Neely made several recommendations to help insurers continue to be impactful in these ways. Her recommendations included designating insurance as an essential service, providing flexibility with meeting regulatory deadlines and having the state regulators coordinate and streamline data requests related to COVID-19 to allow insurers’ employees more time to focus on critical functions related to serving their policyholders.
Eyles stated that health insurers are taking several measures to help reduce patient out-of-pocket costs related to testing and treatment and to reduce both barriers to network referrals and the need for prior authorizations. Dr. Sampson issued a caution to regulators about making retroactive changes related to coverages and exclusions because they could have a devastating impact in the future. Ms. Lueck made several suggestions to regulators, including finding ways to ease the financial strain that comes from social distancing and providing easier access to drug refills and telehealth.
States’ health insurance market response
Commissioner Jessica K. Altman (Pennsylvania), NAIC Health Insurance and Managed Care (B) Committee chair, noted there are many areas states are addressing now, including limitations on cost sharing, access to drug refills and the use of utilization reviews.
This was a two-part session, with the first session open to the public and a regulator-only session immediately following.
This session was originally scheduled to be part of the regular NAIC Spring National Meeting, but the Spring Meeting was cancelled and replaced by a series of virtual meetings.
The next business day after this special session (March 23), the NAIC announced a decision, effective immediately, to suspend holding any further sessions of the virtual Spring National Meeting to allow insurance department and NAIC personnel more time to focus on the crisis caused by COVID-19 and to allow the NAIC time to develop a revised schedule for the virtual Spring Meeting, which will focus on only the highest-priority items.
Farmer closed this special session by noting that state regulators and the NAIC will continue working during this crisis and that presentation materials will be available online.