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Will Health Insurance Cover Covid-19?

Coronavirus affects all sectors in the economy.

The Covid-19 coronavirus outbreak that started in China towards the end of last year has now become a global pandemic. Even though it now appears to be slowing in China, the spread of the disease is accelerating elsewhere, with the World Health Organization recently describing Europe as its current `epicenter.’ Governments are reacting in ever more dramatic ways, closing borders, imposing lockdowns and travel restrictions, shutting schools and colleges, and banning mass gatherings like sporting events.

The way the coronavirus will run from here cannot be known. But alongside the tragic human toll, it already has considerable economic effects, posing significant challenges to the global supply chain and certain business sectors like airlines, travel, and leisure, and causing significant stock market volatility and some steep falls. Central banks, as well as the US Federal Reserve and the European Central Bank (ECB), have responded by cutting interest rates.

The ECB has expanded its quantitative easing program to make more liquidity available. The Fed could follow suit after the United States joined many other countries in declaring a `national emergency.’

A crisis like Covid-19 affects all business sectors – but it especially puts a spotlight on insurers who can expect to be overwhelmed with general inquiries and claims across many different lines, whether that be for health, life or non-life cover. Balancing the need for responding to this influx of activity in the contact centers with a quickly shifting remote workforce is an area that health insurance companies are working to address. Of course, countries are at different stages of coronavirus activity.

Limited Exposure for General Insurers

Beginning with non-life or general insurance, the impact on claims is relatively manageable. Most insurers learned the lessons from the SARS outbreak of 2003 and introduced exclusion clauses for communicable diseases and epidemics or pandemics into most non-life products like a business interruption and travel insurance.

Business interruption health insurance plans payout typically only if physical damage occurs to an organization’s assets or operations – so Covid-19 related claims may not be covered, but there is potential for future disputes on this issue. Meanwhile, travel health insurance may offer cover if a shopper is diagnosed with the virus before or during their trip – but not for travel that is canceled because of the pandemic, unless a customer has taken out premium `any cause. ” cover, which very few have. Of course, interest in `premium’ plans could change in a world after COVID-19.

Event cancellations may cause greater losses to insurers as some large events (but certainly not all) have health insurance plans that may cover them even for epidemics or pandemics.

The reinsurance sector will probably bear some of the brunts here, as insurers claim back the costs of cover from them over a certain threshold. One major global reinsurer, for instance, has been quoted as having exposure of over 500 million euros should all events covered for pandemics be canceled.

The second aspect is the workers’ compensation claims. We could see spikes in workers claiming their employers did not adequately protect them against exposure to the coronavirus brought about by their normal working duties. It is not easy to know at this stage how significant such claims could become. But insurers providing this type of cover to employers may need to brace themselves, depending on how things develop.

Diagnosis for Health Insurers

Covid-19 has an adverse impact on health insurance.

The effect on health insurance is hard to determine at a global level because the impacts will be different country by country. This is both because the number of actual cases and deaths could differ greatly between countries or regions, and because of the varied make-up of health coverage itself. In some countries, like the United States, for instance, most healthcare is privately provided (except for the elderly where Medicare plays a great role), while in others, like Europe and Canada, there is much higher public provision.

The key issue currently in most countries is to enable rapid testing of individuals, particularly individuals in vulnerable populations like the elderly or those with underlying health conditions, especially compromised immune systems. In most nations, this testing is free (provided by governments), or healthcare providers or health insurers are waiving the costs. Free treatment, nevertheless, is not universal, and these costs can be substantial.

As yet, we do not know what the ongoing treatment needs and eventual mortality or morbidity rates from the Covid-19 will be and, thus, what the cost might be for health insurers.

References and Resources

• Medicare
• Covid-19 Versus Other Pandemics like SARS