Biden policy means insurers and businesses must now foot the bill for at-home COVID-19

CLEVELAND, Ohio — A new policy from the Biden Administration aimed at making COVID-19 tests more affordable could cause substantial unexpected costs for insurance companies and self-insured employers now that they’re on the hook for at-home test bills.

That’s assuming people can actually find tests on store shelves.

Starting Saturday, the White House began requiring private insurers – including self-insured business plans – to pay for at-home COVID tests. Insurers must cover eight tests a month for every person they insure, either making them free up front or reimbursing them for up to $12 each if they buy on their own.

It’s part of a number of things the White House is doing to increase testing. The federal government is also buying 1 billion tests to send to the general public for free.

Many larger companies are self-insured, which is when the employer takes on the risk and pays healthcare claims. They may pay an insurance company to run the program, but reimbursement will ultimately cost the employer.

The potential costs have already worried larger companies, said Steve Stivers, president & CEO of Ohio’s Chamber of Commerce, and a former Republican member of the House of Representatives.

“I know that they’re worked up enough about it that some of them are looking at legal action,” Stivers said.

Self-insured plans are common, especially in organizations with 100 or more employees. According to the Kaiser Family Foundation, 64% of workers are in self-insured plans.

What’s the cost?

Krutika Amin, an associate director with KFF, said there are too many variables to predict how much this will cost. The organization, which analyzes health policy, recently studied how available and costly tests were.

Prices varied, and test were only available to buy 10% of the time.

“Even if there were enough tests available, it’s not clear how many people would take this up,” she said.

Oswald, a Cleveland-based company that offers insurance brokerage, is hearing concerns from its self-insured clients.

John Fasola, managing director of the group benefits department, said companies are doing the best they can on short notice. The rules were announced Monday, with the coverage beginning Saturday.

Mark Hinkle, director of client services, said the costs can start adding up. An employee can buy eight tests a month and get reimbursed $12 for each, racking up a $96 monthly bill.

But it isn’t clear how many tests people will want to buy, or even could buy, given the supply issues in stores. It’s not likely every person will max out their test allowance, or that they’ll want tests as much in May as they do January.

Anything tied to how the pandemic plays out will be uncertain. “This whole situation has us all on shifting sand,” Fasola said.

The costs goes beyond tests for employees. Hinkle said for every employee on a health plan at smaller businesses, another 1.1 family members on average are also covered by the same plan.

This means that for a 100-person company (providing coverage to 210, including family members), the costs could add up to $20,160 a month.

The odds of that happening, though, are borderline impossible. Not every person would want to test themselves eight times a month, and everyone interviewed for this story said it was hard for them to even find tests to buy.

Hinkle said the early estimate, at least for the next month or so, is that 30% to 40% of the possible tests will be bought. So, a 100-employee company’s more realistic bill could be about $7,000 monthly, and a 5,000-employee company would pay about $350,000. This does not factor in any potential savings by reducing the spread of COVID-19, including avoided hospitalizations.

It isn’t clear how long the demand for testing will last. Hinkle said the number of tests is likely to fall within 60 or 90 days, if the worst of the omicron variant is behind us.

But there’s no historical usage data or patterns to make predictions.

“Some of this is more search and feel in the dark than most of the things you deal with,” Fasola said.

While the policy will create some stress initially, Hinkle and Fasola said companies will work through it. Some have already set up agreements with pharmacies, where employees can get tests free of charge.

Other companies may buy tests by the pallet and supply them at work. The wholesale price for a test is about $11 currently, Hinkle said, but there’s many kinds of tests available.

Eventually though, prices could be negotiated down, Hinkle said. When and how is hard to know.

Small bill now to save later?

There’s also potential long-term savings to consider. KFF estimates the average COVID-19 hospitalization costs about $20,000. A COVID-19 test in a healthcare facility averages $148.

Hinkle said the point of increasing testing is to avoid worse health outcomes later, which the companies would also have a hand in paying. That was part of the rationale behind President Joe Biden’s plan, because insurers need to pay those costs as well.

Biden’s policy is also aimed at making tests more available and affordable. If insurers weren’t reimbursing these costs, citizens would be paying them.

Stivers said all companies could be affected in the long run, since companies that aren’t self-insured could see premiums go up. Self-insured companies will likely be much more affected though.

He said companies are thinking not only of employees, but about retirees, who can make up a large share of people on the insurance plan.

“Most of what the businesses have right now is unanswered questions,” Stivers said.

Unaccounted for costs

Ceci Connolly, President and CEO of the Alliance of Community Health Plans, said the policy could be especially painful for regional, nonprofit insurance companies.

The problem is that these costs are unexpected, Connolly explained.

While you may have unexpected health costs, the mathematicians in insurance companies can preciously predict expenses for large groups of people, Connolly said.

Premiums in January, however, are normally submitted the previous summer, she said. And there’s no changing them now to deal with the increased costs.

Medical Mutual of Ohio, which administers many private insurance plans in the area, declined to comment on the potential affects on the new policy, saying it was still studying it.

Connolly said the AHCP fully supports more and better testing. But the organization isn’t convinced this policy will solve the problem.

She expects many people to become frustrated, either when they can’t find tests or have trouble getting reimbursed for them. And insurers may be competing with federal and state governments to buy tests.

“Simply saying somebody else will pay for a test doesn’t make tests magically appear in a pharmacy,” Connolly said.

Despite the extra costs, Hinkle and Fasola don’t see it moving companies away from being self-insured.

COVID-19 has been a roller coaster ride as far as health costs. Insurers didn’t see the omicron variant coming, Fasola said.

They also didn’t know in the beginning of the pandemic that hospitals pushing back elective procedures would save costs. Or that people not seeing the doctor regularly would make costs worse later, Fasola said.

Over five or more years, costs are more likely to even out, they said.