covid-19 cell imposed on chart

On Friday, March 20, the NAIC held a special session on COVID-19, the novel coronavirus, which was followed by regulator only sessions to further discuss the topic. President Ray Farmer (South Carolina), welcomed the over 2,500 individuals attending the Webex meeting, and then turned the floor over to an impressive panel of experts on the topic, including government officials, medical experts and various representatives from industry associations.

Key points

Time is limited in study for COVID 19 but reinfection is unlikely.

  • Dr. Jay Butler from the Centers for Disease Control and Prevention shared background on COVID-19 and provided updates on steps currently being taken by both the federal government and the healthcare industry to mitigate the effects of the virus and continue to develop vaccines and other treatments.

One case of COVID-19 can cause infections in one to about three other people.

  • Representatives from Risk Management Solutions provided insights on pandemic modeling, including a brief discussion on the ongoing development by AM Best of stress testing that will be conducted on rated insurers’ balance sheets to gauge the impact of COVID-19 on risk-adjusted capital levels, investment portfolios and reserve adequacy.

Limiting cost sharing, limiting preauthorization and expanding telehealth are some of the proactive actions to increase speed of delivery.

  • Randy Pate, CMS Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight, and Troy Oechsner, Manatt Health, discussed the impact on the health insurance market. Federal actions (e.g. waiving of co-pays) and various state actions that have already been taken were discussed, but many uncertainties remain. FAQs continue to be released by CMS around topics such as identifying essential health benefits for the individual and small group markets, as well as diagnosing and treating COVID-19 under high deductible health plans. Areas of particular concern include adequacy of 2020 rates and impact to 2021 rates, as well as how risk adjustment programs, both at the federal and state levels, will address the impact of COVID-19 on member populations. FAQs can be located here

Financial impact and policy coverage issues discussion

Commissioner Scott White (Virginia) facilitated a discussion on financial impact/policy coverage issues with Sean Kevelighan and Michel Leonard of the Insurance Information Institute.

  • Insurers well capitalized but market volatility may add uncertain strain on capital. The Society of Actuaries has been conducting modeling that would suggest larger, more highly capitalized, insurers would survive the impact of claims volume resulting from a pandemic, but that increased volatility of markets in recent weeks could add another strain on capital.
  • Decline in interest rates could cause shift in investment policies and result in more aggressive positions. Industry exposure to equity securities is relatively small, and 95% of bonds are high quality investment grade securities. The impact on continued declines in interest rates long-term could potentially force insurers to modify investment policies and take more aggressive positions as they have had to do in the past in low interest rate environments.
  • Workers compensation insurers to be the hardest hit. Specific to P&C carriers, the panel noted the largest impact resulting from COVID-19 would be to work comp carriers, particularly those insuring companies in the healthcare space and municipalities with first responders on the payroll. While on the surface business interruption and travel claims might be expected to increase, due to long waiting periods, high deductibles or exclusions the impact on these coverages might not be as significant.
  • Remote working conditions to escalate cyber risk. It is also anticipated that cyber risk is likely to escalate given increased exposure resulting from individuals working from home.

Insurer readiness and consumer issues discussion

A panel discussion around insurer readiness and consumer issues welcomed the respective presidents and CEOs from the American Council of Life Insurers, America’s Health Insurance Plans and the American Property Casualty Insurance Association, along with Sarah Lueck, NAIC Consumer Representative and Senior Policy Analyst, Center on Budget and Policy Priorities.

All organizations provided updates on what they are doing to help their member companies during these unprecedented times. There were also asks of the commissioners as to how the NAIC could be helping the organizations by alleviating regulatory requirements in a time when carriers are prioritizing their members’ physical and fiscal health and also responding to newly created COVID-19 reporting requirements.

Ms. Lueck outlined four main principles the NAIC should be following in this time to help prioritize its focus and the focus of insurers:

  1. Maximize access to health coverage
  2. Find ways to ease financial strain in complying with social distancing measures
  3. Ensure coverage of important health benefits, especially those related to identification and treatment of COVID-19
  4. Continue to protect consumers from fraud and other COVID-19 scams

State-specific health insurance market responses

The last session of the day focused on state-specific health insurance market responses. Commissioner Jessica Altman (Pennsylvania) called on a number of commissioners to share measures their states have put in place to address the COVID-19 pandemic. Some of the more common measures discussed include special enrollment periods and increased access to and use of telehealth services.

Additional resources

Further information on COVID-19 are available on the NAIC Coronavirus Resource Center.

Additional information on potential impacts to your organization, and other general resources are available on our Coronavirus Preparedness Resource Center – along with information specific to health insurers here.

Contact your Baker Tilly advisor for assistance or with any questions on how to help your organization through the financial impacts of the novel coronavirus.

Contact your Baker Tilly advisor for assistance or with any questions on how to help your organization through the financial impacts of the novel coronavirus.

Daniel E. Buttke
John Romano
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