Unemployment and Uninsured Rates Rising – How COVID-19 Has Shifted the Payer Mix

If you’re like most hospitals, health systems and medical practices, you build your business model on revenue from commercially insured patients who get their coverage through their employers. And why not? Employer-sponsored insurance (ESI) has been one of the industry’s most stable funding sources for decades.

A shifting payer mix is one of the major forces that was already exerting margin pressures on providers, and the COVID-19 outbreak has certainly accelerated that shift.

At one point, the Centers for Medicare & Medicaid Services (CMS) projected that ESI will cover 175.1 million people in the U.S. this year. That’s two million more than in 2016. Over that same period, CMS projected that national health expenditures attributable to people with ESI will increase nearly 21 percent this year, to nearly $1.2 trillion, from a little more than $972.2 billion in 2016.

Then the COVID-19 outbreak happened, and turned the healthcare provider’s traditional business model on its head. According to a recent analysis from the Kaiser Family Foundation, nearly 27 million people alone may lose their ESI between March 1 and May 2 due to job loss caused by the pandemic.

27 Million Peoplemay lose their ESI between March 1 and May 2 due to job loss caused by the pandemic.

“Unemployment insurance filings continue to climb each week, and it is likely that people will continue to lose employment and accompanying ESI for some time,” the report says. “Though, some of them will return to work as social distancing curbs are loosened.”

The immediate challenge for providers is to estimate how many people in their patient populations will lose their ESI, how that loss of coverage will affect their revenue and how they can recast their business models and revamp their operations to remain financially viable.

The report estimates that nearly 78 million people live in a family in which someone lost a job because of the pandemic. Of those 78 million, ESI covered 47.5 million. According to the projections in the report, of those 47.5 million:

  • 8 million will become uninsured
  • 2 million will retain ESI through another family member
  • 6 million will secure health benefits from another source

The five states that will be hit the hardest, in terms of the projected number of people who will become uninsured, are:

California 3,427,000 newly uninsured

Texas 1,608,000 newly uninsured

Pennsylvania 1,543,000 newly uninsured

New York 1,471,000 newly uninsured

Georgia 1,444,000 newly uninsured

“Not surprisingly, states in which the largest number of people are estimated to lose ESI are large states with many people working in affected industries,” the report says.

According to an analysis of the projected 26.8 million newly uninsured, over the next six months, 12.7 million, or 47.4 percent, of these individuals will be eligible for Medicaid. Another 8.4 million, or 31.4 percent, will be eligible for tax credits to obtain coverage through an ACA plan on a state or federal health insurance exchange. The remaining 5.5 million individuals are projected to be ineligible for government sponsored coverage (or assistance to obtain coverage) for various reasons.

A shifting payer mix is one of the major forces that was already exerting margin pressures on providers, and the COVID-19 outbreak has certainly accelerated that shift.  It will be important for your team to help these newly uninsured patients obtain any third-party coverage for which they are eligible.

TAKEAWAY

If you’re like most finance and revenue cycle managers at hospitals, health systems and medical practices, you may not have the time today to evaluate and plan for the impact of these broad forces while also working to keep your doors safely open. Maybe it’s time to look at a strategic partner who understands the margin pressures the healthcare industry is facing and has the technology and expertise to help your health system face the immediate challenges and prepare for the future.

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