Hartford Business Journal

8 Hartford Business Journal • June 29, 2020 • www.HartfordBusiness.com By Matt Pilon and Greg Bordonaro mpilon@hartfordbusiness.com; gbordonaro@hartfordbusiness.com A s Connecticut employers await 2021 health insurance rates in July, it's anybody's guess whether the COVID-19 pandemic will sock or soothe benefits budgets next year. Insurers, which have seen claims activity fall steeply since March, say they're modeling numerous scenar- ios as they prepare their annual rate filings for the Connecticut Insur- ance Department. Key questions insurers are asking themselves include: Will there be a second wave of the virus in the year ahead? How many elective proce- dures delayed in recent months will actually be performed? Will a vaccine come in 2021? Will fewer patients feel comfortable going to the doctor or hospital? "All of that adds a whole lot of uncertainty," said Neil Kelsey, chief actuary for Farmington-based health insurer ConnectiCare. The answer to those questions could cause major changes in healthcare use and spending. Trying to project those trends when Obamacare took effect about a decade ago was similarly challeng- ing, Kelsey recalled. "We overcame that," he said. "We missed on some things and got some other things right. I kind of look at this the same way." Meanwhile, area benefits brokers are hop- ing that vastly reduced health- care usage in Connecticut during the pandemic — a result of elective surgeries being postponed and some patients, even those with serious conditions, avoid- ing the emergency room or other care — will translate into lower prices for businesses in the year ahead. However, skepticism abounds, as employers and brokers worry that hospital financial distress will lead health systems to demand price hikes from insurers, if not in 2021 then in the next few years, depending on when contract agreements expire. Connecticut hospitals said they expect to lose a combined $1.5 billion this year because of the slowdown caused by the coronavirus. "I wonder how the hospitals will make that money up and if employ- ers like me will have to foot the bill," said Chris Ulbrich, Chairman and CEO of North Haven-based Ulbrich Stainless Steels & Special Metals Inc., which employs 700 people, in- cluding about 300 in Connecticut. Some bro- kers, hardened by years of near-constant rate increases, suspect insurers will overstate expected future costs stemming from the crisis. "What's going to happen? The usual," said Jason Gutcheon, a part- ner at Professional Business Insurers in West Hartford. Gutcheon said insurers will likely place emphasis on a wave of delayed elective procedures driving up claims, even though it's tough to predict whether consumers will be as willing to go to the doctor in the year ahead. "They're going to overinflate the backlog," he predicted. Insurers have been sitting on extra cash because of the lack of claims activity in recent months. In fact, they've been able to give away free healthcare services during the pandemic, waiving copays and other costs for telehealth and other treat- ments, to improve access to care and also stay in compliance with Obam- acare loss-ratio rules that require a cer- tain percentage of premium revenue each year to be spent on medical care. "We have seen an incredible re- duction in the utilization of health- care services, mostly with respect to elective procedures," said Rob Ko- sior, ConnectiCare's chief operating officer. "We weren't sure whether we would see New York City infection levels, and fortunately we have not." Potential for consolidation, higher costs Hospital and physician group merg- ers have been the norm in Connecticut and many other states over the past de- cade or more, and studies have shown that increased provider market power has led to higher healthcare costs. As providers reel to varying extents from the financial impacts of COVID-19, there aren't signs yet of a local dis- tressed consolidation wave, but some predict that it's coming nationally. Stuart Altman, a health economist and professor at Brandeis Univer- sity, predicted "massive consolida- tion" of U.S. academic medical cen- ters during a May 20 virtual panel discussion hosted by Catalyst for Payment Reform, which represents large employers looking to improve healthcare quality and reduce costs. "There will be no hesitation to raise prices," Altman said. "Employers are going to need to get much stronger as a group or else they are going to get run over by these price increases." Kosior, the Con- nectiCare COO, said it's "certainly possible" that hospitals' finan- cial struggles will impact upcoming contract renew- als, but he sought to downplay it. "I'm trying right now to be a little bit more optimistic with respect to that," he said. "We have a good relationship with our hospitals and we have been supportive during and prior to the pandemic." He noted ongoing state-level delib- erations to cap, or "benchmark," an- nual healthcare cost increases, which Ripple Effect As 100-year pandemic wanes, employers ponder potential impacts on health insurance costs, design FOCUS: INSURANCE PHOTO | CNN Neil Kelsey, Chief Actuary, ConnectiCare Jason Gutcheon, Partner, Professional Business Insurers Chris Ulbrich, Chairman and CEO, Ulbrich Stainless Steels & Special Metals Inc. Many people have avoided elective surgeries since coronavirus hit Connecticut, creating financial strain for hospitals, which could lead to higher future health insurance costs for employers.

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