Health insurers adjust as COVID-19 spreads in US: AM Best

As the coronavirus (COVID-19) rapidly spreads in the United States, the  risk to the country's health insurers is compounding in a multitude of ways, including potential deterioration in their capital, according to an analysis by AM Best.

The agency believes that health insurers are facing three major types of risks - claims, economic and operational.

Health insurers are expected to receive an increase in the number of claims related to the virus, as well as an increase in claims severity, somewhat offset by a decline in non-urgent claims as individuals may opt to avoid doctor offices and clinics.

AM Best stated that the economic risks to health insurers exist on multiple fronts, including lower membership and premiums from layoffs, lack of new sales, concerns regarding collection of premiums as well as reimbursements from employers for administrative services contracts, decline in investment income as well as realised and unrealised losses of invested assets.

Furthermore, the operational risk for health insurers is driven by the ability to process an influx of claims and inquiries from its members, although many insurers already utilise work-from-home practices.

AM Best stated that it is keeping its market segment outlook for the health insurance industry at stable for now, although it acknowledges the potential for deterioration in capital from an earnings and investment perspective.

However, it noted that, favorable earnings in the past few years have resulted in the strengthening of risk-adjusted capitalisation, which should aid in withstanding the financial impact of the coronavirus.