Health insurers justify passing COVID treatment costs on to patients despite massive profits

It’s a question so central to the nature of living in a human body that it has a well-established rejoinder: You can’t. But the way the U.S. medical system is arranged—with all its adversarial-yet-interconnected players ranging from hospitals to drug makers to health insurers to pharmacies and all the middlemen in between—necessitates answering that precise question. Using medical services naturally comes with a cost and someone has to pay that cost. But how much of this financial burden should be a COVID-19 patient’s responsibility, particularly in the midst of a pandemic that’s currently leaving some 91,000 Americans hospitalized with COVID on any given day?

For a growing number of health insurers, the answer is: More, given the availability of safe, effective vaccines and the potentially massive costs of treating a serious COVID-19 case with respirators and mechanical ventilation. Those costs can easily cross tens of thousands of dollars and may even top $100,000 in some instances for inpatient COVID treatment even if you have health coverage. And despite a pandemic that’s seen a surge in coronavirus cases and hospitalizations in the past few months due to the Delta variant and created massive windfalls for the health insurance industry, most of the country’s private insurers have ended or will soon end voluntary arrangements to waive the out-of-pocket treatment costs borne by COVID-19 patients.

“Last year, insurers were particularly profitable because of the big dip in health care utilization,” said Cynthia Cox, vice president of the nonpartisan health care think tank Kaiser Family Foundation’s (KFF) program on the Affordable Care Act (ACA), or Obamacare. “That happened in April when everyone was more or less on lockdown. Not only were people not going to school and not going to work, but they were also not going to the doctor or getting elective surgeries done. This year, health care spending is still suppressed below what it normally would be, but it’s not quite as dramatic as it was last year when health insurers were first deciding to waive these out-of-pocket costs for patients.”

A KFF analysis published in August found that, of the two largest health insurers in each of the 50 states and District of Columbia, nearly three-quarters have halted or will soon halt their voluntary cost-sharing moratoriums for COVID-19 treatment. These costs are different from, say, coverage of COVID diagnostic tests or the administration of free vaccines from the likes of Pfizer/BioNTech, Moderna, and Johnson & Johnson, which comes with more stringent measures to shield patients from out-of-pocket spending.

“Federal law requires all private insurance plans to cover the entire cost associated with approved COVID-19 testing so long as the test is deemed medically appropriate. Additionally, the U.S. government pre-paid for COVID-19 vaccines, and required COVID-19 vaccines be made available at no out-of-pocket costs regardless of whether the vaccine recipient is insured,” wrote the study authors. “However, while a handful of states required or created agreements with insurers to waive COVID-19 out-of-pocket treatment costs for their fully-insured plan enrollees, there is no federal mandate requiring insurers to do so.”

Peterson-Kaiser Family Foundation Health System Tracker

Absent such mandates, Cox and a variety of other industry experts who spoke with Fortune point to one major reason why insurers feel increasingly comfortable passing COVID costs back on to patients: A risk/benefit industry like insurance requires you to have some skin in the game, however crassly that may play out in practicality, and the increased availability of products like vaccines directly affect insurers’ risk/benefit calculus. After all, the logic goes, people who actively choose not to get vaccinated and consequently get a serious COVID infection have done their own risk/benefit analysis of sorts. The risk isn’t just to that patient’s health, but to the financial capacity of the health care system at large.

“People can now get a vaccine that would prevent the vast majority of hospitalizations, and so there’s probably less public pressure on insurers to waive these costs. There certainly are people who are vaccinated and are still having to be hospitalized and there’s also kids who cannot get the vaccine and are still having to be hospitalized,” said Cox. “But those, thankfully, make up a small share of the hospitalizations for COVID. And so I think there’s also just kind of less sympathy, to be frank.”

Phillip Chan, a physician and CEO of blood purification technologies firm CytoSorbents Corporation, echoes the sentiment.

“It is a preventable illness at this point, with the availability of the vaccine, and by refusing to waive those [treatment] fees, they’re trying to use economics to encourage people to get vaccinated,” he said. “There’s this absolute truth, the old adage that an ounce of prevention is worth a pound of cure.”

The problem for patients languishing in hospitals and ICU beds is the massive uncertainty surrounding what that “pound of cure” might mean for their wallets.

The unknowable cost of COVID treatment

More than 80% of the nation’s ICU beds are currently in use, and more than 28% of ICU beds were being used to treat COVID patients as of September 23, according to Department of Health and Human Services (HHS) data. How much any given patient might face in out of pocket charges for that hospital stay? It’s nearly impossible to generalize anything outside of a case-by-case basis, according to industry experts.

“There’s so many variables, one really wouldn’t know when you walk into a hospital with COVID symptoms what kind of treatment you’re going to have to have,” said Wendell Potter, a former health insurance executive at Cigna who now calls himself a “reformed insurance propogandist” leading efforts to fight health plans that pass the financial onus of medical care on to patients.

Potter says he was inspired to change course while he was still at Cigna in part after witnessing firsthand a popup medical clinic in his home state of Tennessee providing charity care to people who had jobs and insurance but still couldn’t afford high out-of-pocket medical costs. His latest initiative is an advocacy group called the Lower Out-of-Pockets Now Coalition (LOOP) that aims to shed light on the effects high out-of-pocket costs can have on a patient, with the COVID crisis serving as an ongoing real-world case study.

The out-of-pocket costs for a COVID patient can vary widely, he agreed. “It depends on the kind of health policy you have, what your deductibles are, what’s considered a covered benefit under your plan. It could be relatively minor, but you could be hospitalized for days. And so it just it depends,” said Potter.

“It’s one of the features of our health care system,” he added. “There are thousands of permutations of health plans, and there are as many cost-sharing arrangements as there are health plans. So you don’t know. You do not know. And there is not enough transparency for anyone to have any ability to know what you might be facing.”

Independent groups like FAIR Health have attempted to compile what these expenses might look like. It’s a difficult metric to measure given the permutations of cost-sharing arrangements and lack of transparency noted by Potter. The technical “charge” for COVID treatment in a hospital could differ wildly from the “allowed amount” that a health plan can pay out for a covered medical service. But the general trend points to costs which accelerate significantly the longer someone has to stay in a hospital, especially depending on your age and whether or not you have private insurance.

FAIR Health

The uninsured or those who must seek COVID treatment out of their health plan’s network face the greatest financial burdens. For these Americans, the average COVID treatment cost can range between $51,389 for 21-to-40-year-olds to $78,569 for those who are between 41 and 60, according to FAIR Health. If you’re under 20 and don’t have insurance, COVID hospitalization charges average around $68,300, while they top $77,300 for those older than 60.

Even with insurance, costs can be daunting for COVID patients, per FAIR Health’s analysis, with the need for longer hospital stays and more aggressive treatments in the ICU hitting them particularly hard. For instance, in Florida, the median cost for insured patients who must pay at least part of the tab for a COVID hospital or ICU stay can range from $23,787 (a hospital stay) to $115,497 (if you’re in the ICU or require a ventilator). At that point what comes out of your pocket is entirely dependent on what your health plan chooses to cover.

“You could come out of that experience having to pay a few hundred dollars if you are admitted to the hospital and maybe have a [health savings account] or something that can help you mitigate that cost,” said Potter. “But a lot of folks don’t. So you can wind up paying thousands and thousands of dollars.”

Health insurers have reaped massive profits during the pandemic

What makes things a bit awkward for health insurers from an optics standpoint is the industry hasn’t just done well but thrived during the coronavirus pandemic. Much of that has to do with significantly lower use of “elective surgeries” and procedures (many of which are still medically important and expensive, such as cancer screenings and biopsies) amid social distancing rules and hospitals’ prioritization of COVID patient care, as KFF’s Cox notes. While some of those elective procedures have resumed, even during the Delta wave, many hospitals located in COVID hotspots still don’t have the capacity to provide those services. That, in turn, inflates health insurers’ bottom lines.

Spokespeople for major insurers such as Humana and America’s Health Insurance Plans (AHIP), the industry’s main trade association, pointed Fortune to the industry’s ongoing COVID coverage policies. Even those can vary depending on the precise kind of health coverage you have, such as a private Medicare Advantage plan which supplements the public program for the elderly. “Humana will cover out-of-pocket costs for treatment of confirmed cases of COVID-19 for all Humana Medicare Advantage medical plan members,” wrote a Humana representative in an emailed statement. “COVID-19 treatment is a benefit that is part of Humana’s 2021 Medicare Advantage plans. Note that there are differences for other lines of business.”

AHIP has a webpage dedicated to tracking its member insurers’ efforts to tackle the pandemic, including through lowering patient costs. UnitedHealth Group, the nation’s largest private insurance provider, extended its zero out-of-pocket costs policy for inpatient COVID treatment in January 2021—for one month.

Meanwhile, industry profits have maintained their high altitude during the first half of 2021. For instance, UnitedHealth Group raked in $4.37 billion in second quarter profits this year and raised its full-year earnings guidance; insurer Anthem reported $1.8 billion in profits in the same quarter and Cigna $1.47 billion. Companies like Humana, which serve a massive elderly population through Medicare Advantage, have experienced more of a financial hit amid higher payouts for older patients, but in general, private insurers expect the amount they have to spend on covering medical care to begin rebounding in 2022.

In the meantime, however, the pandemic’s downstream effects on the industry have left insurers in such a good financial position that many haven’t even had to spend the minimum amount of money (earned through members’ monthly premiums) to cover actual medical care as is required under federal law. Eventually, that will lead to billions in insurance rebates. But while the future may be more uncertain for insurers as people seek the care they deferred during the pandemic, the question of the ethics behind passing costs onto COVID patients always seems to come back to vaccinations.

“Had people just taken the COVID vaccine it could have, in the past several months alone, prevented about 300,000 cases of COVID-19 and an estimated $5 billion to $6 billion in costs to the health care system,” said Chan, the physician and blood purification company CEO. “When you do the math, it’s about $80 to vaccinate a patient, so it would have cost about $24 million to vaccinate those same people who contracted COVID. That’s quite a return on investment.”

Industry representatives say that the cost-sharing approach isn’t meant to penalize those without a COVID vaccine. “Encouraging and enabling eligible people to get vaccinated is still one of our best defenses against the disease. That’s why health insurance providers continue to focus on carrots, not sticks, in helping more Americans get vaccinated,” wrote an AHIP spokesperson in an emailed statement.

But for patients staring down tens of thousands of dollars in out-of-pocket COVID medical expenses, that carrot may sure start feel much more like a stick.