While insurers are set to weather COVID-19’s financial storm, an inability to keep up with how the pandemic is changing healthcare will be credit-negative in the long term, according to a new report from Moody’s Investors Service.
The coronavirus pandemic has put a spotlight on chronic conditions, the need for continued investment in telehealth and virtual care and the drive toward value-based care, according to the report.
Health plans that are able to adapt to these changing trends are far better positioned for long-term success, Moody’s said.
“The ability or inability of our rated health insurers to adapt to these changes in the next three to five years will be an important driver of credit strength,” the analysts said. “Health insurers that successfully adapt will boost their credit strength through lower medical cost trends than their peers.”
Insurers have consistently reported strong financial performance through the pandemic, especially as care utilization dropped significantly in the first half of the year. Moody’s said 2020 earnings are likely to be on par with expectations for the year without COVID-19 in the mix, leaving them largely “unscathed.”
Costly conditions like diabetes, hypertension and cardiovascular disease were on the rise prior to the pandemic, but the vulnerability of these patients to COVID-19 puts greater emphasis on offering interventions to manage their conditions, Moody’s said.
Chronic conditions like these account for 90% of health spending, Moody’s said.
“Managing co-morbidities is already a long-term challenge for health insurers,” the analysts wrote. “While an increased focus on co-morbidities could result in beneficial early intervention in some cases, it could also result in additional complex care, leading to pressure on health insurers to help contain costs, potentially at the expense of margins.”
The increase in telehealth use that accompanied the pandemic could prove to be a valuable tailwind in addressing these costs, Moody’s said.
The long-term challenge for payers, however, is determining the correct reimbursement levers and investing in converting provider networks to offer these services, according to the report. These investments will be key in driving virtual care from a largely urgent-care-focused service to providing more primary services.
Telehealth is also proving to be a valuable tool to reach patients in rural areas and to offer behavioral health care, Moody’s said.
“Insurers that succeed in better using the potential of telehealth will have a cost advantage over time,” the analysts said.
The continued push for value-based care “ties it all together,” according to the report. Such arrangements are critical to coordinating care for patients with chronic conditions, and, while adoption has been slow, the pandemic has underscored the merit of such agreements.
For one, providers in value-based arrangements were better positioned to handle the sharp decline in service use and elective procedures, according to the report.
“Providers on value-based care contracts were much less impacted, as they continued to receive their capitated payments during the crisis,” the analysts wrote. “This will likely accelerate the adoption of full risk value-based care, and to the extent, this helps control healthcare costs, it would be a credit positive for the industry.”