The insurance industry is in a precarious position right now.
As the industry continues to lose money, its members are losing confidence in the quality of the insurance policies that they’re writing.
While many insurers have made big strides in reducing the number of catastrophic claims, some insurers have been slow to embrace the shift toward smaller, more comprehensive policies that have lower deductibles, lower co-payments, and lower out-of-pocket expenses.
In fact, most insurers have stopped writing catastrophic coverage in recent years.
Insurers are worried that if they continue to underwrite smaller, lower-quality policies, they could become less valuable to the market and could be out of business.
If that happens, consumers would have less choice.
So, as a result, insurers are shifting to lower-cost policies, including catastrophic, that offer greater protections against claims.
These lower-priced policies are less likely to be fully funded, and if they are, they will not cover all of the costs associated with the catastrophic event.
That means consumers may not be able to afford catastrophic coverage, especially if they qualify for lower cost subsidies or a government-subsidized form of premium assistance.
And that may cause insurers to stop selling them.
The Insurance Information Institute (III), a nonprofit research organization, recently analyzed data from the largest insurance carriers and found that the largest insurers were selling fewer catastrophic coverage options, including no catastrophic coverage at all.
As a result of this shift, insurers have increasingly turned to a more generic, less comprehensive form of coverage called “other coverage,” which is not guaranteed to cover all the costs of catastrophic events.
The III reports that more than two-thirds of all the catastrophic coverage sold in the U.S. between January 2018 and September 2018 was generic.
It is not clear how many of these generic policies were sold through the marketplace, but the III found that most were sold to small businesses and individuals who have limited access to medical professionals or financial services.
These small businesses may be able, for example, to purchase a cheaper policy that offers a limited amount of coverage for a limited number of claims.
And individuals with limited access may be less likely than those with more extensive health insurance to purchase the policy.
“The shift toward less comprehensive catastrophic coverage is the largest single factor affecting the number and costs of COVID-19-related claims in the United States,” said III President and CEO Scott Anderson.
The study found that about a quarter of all catastrophic claims in 2018 were paid for through the federal marketplace, and about one in five claims paid for by state and local governments.
The largest insurers are selling fewer policies than before, and many of them are offering no coverage at the lower cost.
In some cases, they have reduced the amount of policies they sell, and some have reduced their premiums.
But as a consequence, the cost of catastrophic coverage will continue to rise and premiums for catastrophic coverage remain high, particularly for those who qualify for the subsidy that the ACA created for catastrophic insurance.
This premium increase will increase costs for those with high out- of-pocket costs, according to the IIA.
While this trend of lower quality catastrophic insurance may be discouraging some consumers from signing up for the policy, it is unlikely to change the market dynamics and drive the cost for catastrophic premiums down.
In the longer term, it may also make it more difficult for insurers to find qualified individuals to sell catastrophic coverage to, especially since many states have expanded Medicaid and other forms of coverage that cover those who have lost income due to COVID.
Insurer changes to policies The shift toward lower-risk coverage may also have an effect on insurance companies.
The most common insurance company to drop catastrophic coverage from its policies is Blue Cross and Blue Shield of North Carolina.
In 2019, Blue Cross’ total annual catastrophic coverage was $2.1 billion, but it reduced that number to $1.4 billion in 2020.
Blue Cross also reduced its out-patient catastrophic coverage rate to 0.3 percent in 2020, down from 0.6 percent in 2019.
While Blue Cross has reduced its catastrophic insurance coverage by about 30 percent over the past four years, it remains one of the largest providers of catastrophic insurance in the country.
Blue is one of four insurers in the state of North Dakota that also have stopped selling catastrophic insurance to individuals.
The other two insurers are Aetna and Aetos HealthCare.
Both Blue Cross Blue Shield and AETos Blue Cross have recently started to lower the amount that they charge for catastrophic health insurance coverage.
The decrease is not surprising given that most of the premiums paid by Blue Cross are deductible and that they are covered by Medicare and Medicaid.
But it may be an important first step in changing the insurance landscape in the future.
“While our analysis shows a decline in the number, size and frequency of catastrophic-related out-pocket claims, there are still many factors that influence the cost-effectiveness of catastrophic policies,” said James R.