The COVID-19 Pandemic, Politics and Drug Prices: What our Stop Loss leaders are watching in 2021

As the Stop Loss team at Voya Employee Benefits entered the 2021 renewal season, we heard questions and concerns around what a “new normal” could look like in regards to marketing and renewing Stop Loss policies.

And while there were certainly different challenges in a work from home environment and little to no face time, the market resembled the previous couple of years with a few exceptions. In this piece, we've outlined what caught our attention during the 2021 renewal season, as well as what we'll continue to watch as 2021 progresses.

COVID-19 and the U.S medical system

We saw several assumptions on the implications for the Stop Loss renewal season heading into fall with the pandemic still looming. In evaluating the medical delivery system with the ongoing stressors of the pandemic, we continue to see some emerging trends. COVID-19 continues to reshape many facets of current and future medical delivery. 

What to watch:

  • Closing hospitals. According to Becker’s Hospital Review, approximately 40% of rural hospitals in the U.S. are either at immediate or high risk of closure.1 Hospitals are finding themselves strapped for cash due to lower patient volumes, cancelled elective procedures and higher expenses tied to the pandemic. A number of action steps are being taken to offset the financial damage, including reduction in pay, halting capital projects, and laying off workers. More than 260 hospitals and health systems furloughed workers in the past year and dozens of others have implemented layoffs.2
  • Increasing first dollar margins. Profits for some health insurers were helped partly by lower medical costs due to fewer elective surgeries as hospitals made room for Covid-19 patients.3 On the provider side, one of the nation’s largest hospital chains saw revenue per admission climb by 10.5%.4 
  • Deferred medical procedures. Some patients are delaying medical care when possible, which may cause more severe health outcomes. Take heart surgery for example: According to a January 2021 presentation by the Society of Thoracic Surgeons, heart surgeries in the U.S. dropped by 53% due to the pandemic. Their analysis found drops in both elective and non-elective surgeries.5 

Why it matters:

Some of the early revenue results demonstrate that last year's lower admissions could translate to higher cost for current treatments. And with care potentially becoming more difficult to access in rural areas, we could also begin to see two very strong possibilities: (1) higher cost of care through delayed treatment or (2) lower access to urgent care and specialty care. Both have the potential to indicate higher costs down the road for catastrophic risk. 

A change in administration

As with any presidential change, we are watching closely to understand the impact of the new administration's agenda. As the Self-Insurance Institute of America, Inc. (SIIA) noted in a recent communication to members6, the new administration has proposed several areas of focus related to the Affordable Care Act (ACA).

What to watch:

  • Larger ACA subsidies and elimination of the employer firewall. With the new administration's proposed changes to the ACA, an employee at any income level would be allowed to (1) opt-out of their employer plan, (2) purchase individual market plan through an ACA Exchange, and (3) qualify for a more generous government subsidy irrespective of an employer plan offering.
  • Earlier buy-in to Medicare. Employees between the ages of 60 and 64 could be allowed to enroll in Medicare, thereby allowing older employees to leave the employer risk pool. However, the administration may seek to claw-back a portion of savings through an employer tax. Expanding Medicare to 60-64 year olds may reduce health care utilization and overall cost to the employer sponsor.
  • Legislative changes and ACA reform through reconciliation. This procedure has been used in the past to push forward major policy initiatives without the need to gain a super majority in the Senate. The reconciliation process can only include provisions that impact revenue (i.e., taxes) and spending, but it could very well be used to enact broad changes to the ACA and healthcare in general.
  • Cost transparency fines. Provider cost transparency fines for non-compliance are small, which may prevent this from gaining traction. 
  • Government negotation of drug prices. Allowing the government to negotiate drug prices could help lower them, but could also put more pressure on cost shifting.

Why it matters:

These changes may contribute to further cost subsidization. Government programs do not cover the costs of care delivery so commercial insurance (including self-funded plans) pays higher prices to cover costs. The public health option also has the potential to have a significant impact on the employer-sponsored health system as more employees opt out of employer plans and buy into the public option plan.

Emerging cell and gene therapy treatments 

During the summer of 2020, we discussed the possibility of a new drug called Roctavian (a gene therapy for hemophilia A with an expected price tag of $2m-$3m for treatment) and how it would be addressed. However, in August 2020, the FDA delayed a decision on Roctavian, the potential first gene therapy for adults with hemophila A. Yet there are other high-dollar drugs that could have an impact.

What to watch:

While there are only a handful of diseases currently with cell and gene therapy treatments, including Zolgensma for spinal muscular atrophy with a $2M+ expected cost7, there are nearly 400 cell and gene therapies in development8. Not all new therapies will result in high dollar treatments, however it is expected some will. The MIT NEWDIGS focus Writing Group forecasts between 30 to 60 treatments affecting 350,000 patients by 2030 with over half of the treatments for oncology (lymphomas and leukemias).9

What does this mean?

We have partnered with a leading company specializing in both cell and gene therapy research and treatment to continue monitoring this emerging pipeline and impact to our stop loss clients. This collaboration provides us with data to better understand the risk and eligibility with these new treatments, access to contracted treatment centers of excellence when therapies are needed for a patient, and educational opportunities for our brokers and clients.

In summary

The Stop Loss team at Voya Employee Benefits will continue to watch the impacts of COVID-19 on the medical delivery system, the changing political environment, and other trends, such as the use of high cost drugs and procedures—and as we do, we'll share our insights with you. We're confident in our ability to support our customers’ and brokers’ needs with Stop Loss solutions that offer additional financial protection against rising costs. 

Reach out to your Voya representative to learn more. 

We are providing this content for informational purposes during the ever-changing and developing COVID-19 pandemic.  The information provided here is not intended to cover every situation or to apply generally to our business during normal times.  This content is subject to change as the situation warrants.   We reserve the right to modify, alter, rescind, extend or otherwise amend the information and actions presented here via subsequent versions or communications.  This is not legal advice, and you should not rely on or construe it as legal advice. 

Excess Risk (Stop Loss) Insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN) and ReliaStar Life Insurance Company of New York (Woodbury, NY). Within the State of New York, only ReliaStar Life Insurance Company of New York is admitted, and its products issued. Both are members of the Voya® family of companies. Product availability and specific provisions may vary by state.

1 "State by state breakdown of 897 hospitals at risk of closing," Becker's Hospital CFO Report. January 22, 2021. 

2 "9 hospitals laying off workers," Becker's Hospital CFO Report. February 4, 2021.

3 "UnitedHealth profit beats on lower medical costs due to deferred care," Reuters. January 20, 2021.

4 "Biden proposal to strengthen ACA could undermine the self-insurance industry," Self-Insurance Institute of America, Inc. February, 2021.

5 "The Big Number: During pandemic, heart surgeries plummetted by 53 percent," The Washington Post. February 8, 2021.

6 "HCA Healthcare’s Profit Rises Despite Drop in Patients," The Wall Street Journal. February 2, 2021.

7 "At over $2 million, Zolgensma is the world's most expensive therapy, yet relatively cost effective," Forbes. June 5, 2019.

8 "Medicines in Development 2020 Update: Cell and Gene Therapy," Pharmaceutical Research and Manufacturers of America, 2020.

9 "Estimating the clinical pipeline of cell and gene therapies and their potential impact on the US healthcare system," MIT NEWDIGS FoCUS Writing Group. June 2019.