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Effects of COVID-19 in ACA markets

Figure shows 4 scatter plots with trend lines


In this post, we examine how the COVID-19 pandemic affected frequencies of diagnoses and claims costs in the Affordable Care Act (ACA) marketplaces in 2020 and 2021.

The ACA marketplaces are critical sources of coverage for millions of Americans and were increasingly so during the COVID-19 pandemic due to job losses and coverage disruptions. The individual and small group markets covered 14.1 million and 7.9 million enrollees, respectively, almost exclusively younger than age 65, in 2020. Though older adults are generally the most vulnerable to COVID-19, the pandemic’s reach extended to all age groups. Millions of individuals became sick with COVID-19 and hospitalized with its complications, while others stayed home and avoided care.

The data, sample, and analysis

We used issuer-submitted plan-level data between 2018 and 2021 from the ACA individual and small group markets for all states and the District of Columbia to examine our two primary metrics: issuer claims costs and frequency of diagnoses.

For issuer claims costs:

  • We examined total paid claims costs for medical and pharmaceutical services.
  • We summarized results as per member per month (PMPM) cost by state.

For frequency of diagnoses:

  • We examined the number of enrollees with specific medical conditions, referred to as Hierarchical Condition Categories (HCCs) in the Department of Health and Human Services (HHS) risk adjustment model.
  • We summarized results as national percentage frequency by HCC.

To isolate the effect of the pandemic, we compare 2019–2020 differences to 2018–2019 differences and compare 2020–2021 differences to 2019–2020 differences. For example, we calculate the 2020 net change as the difference between the 2019–2020 change and 2018–2019 change, divided by the 2019 value.

While the diagnosis for COVID-19 itself is not captured by any HCC currently used by HHS, we identified 8 HCCs that contain diagnoses potentially related to complications of COVID-19.

Condition categories potentially related to complications of COVID-19

Complications from COVID-19 Associated HCCs (V05 HHS-HCC payment model)
Hypoxemic respiratory failure/ARDS HCC 127 Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes
Sepsis and septic shock HCC 2 Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock
Cardiomyopathy and arrhythmia HCC 130 Congestive Heart Failure
HCC 142 Specified Heart Arrhythmias
Complications from prolonged hospitalization, including secondary bacterial infections HCC 163 Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections
Mechanical ventilators HCC 125 Respirator Dependence/Tracheostomy Status
Multiorgan failure HCC 38 Acute Liver Failure/Disease, Including Neonatal Hepatitis
HCC 127 Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes
HCC 130 Congestive Heart Failure
Myocarditis HCC 135 Heart Infection/Inflammation, Except Rheumatic

Condition frequencies and claims costs generally decreased on net in 2020, and rebounded in 2021

The typical year-over-year pattern, which we observed between 2018 and 2019, is that HCC frequencies and PMPM claims costs tend to increase over time. However, comparing 2019 and 2020, claims costs and frequencies of diagnoses were generally stable or decreased slightly. Consequently:

We observed net decreases in 2020 for claims costs in 46 states and for frequencies of over 80% of conditions.

Between 2020 and 2021, condition frequencies and PMPM claims costs both increased by more than in pre-pandemic years. The 2021 net change was positive for almost all HCCs with over 100,000 enrollees and for claims costs in every state. Nationally, PMPM claims costs increased to $494 in 2021, after remaining stable at $434 in 2019 and 2020. The increase between 2020 and 2021 ($60), was larger than in pre-pandemic years of 2018 to 2019 ($30).

Figure shows 4 scatter plots with trend lines

Changes in frequencies of condition categories associated with COVID-19 and costs of care, 2018-2021

The frequency of ARDS increased in 2020 and 2021

Of the 17 HCCs with a positive 2020 net change, four were related to complications of COVID-19. The frequency of acute respiratory distress syndromes (ARDS), as measured by HCC 127, is a notable case. ARDS increased by 30% between 2019 and 2020, compared with just 9% between 2018 and 2019. Claims with an ARDS diagnosis increased by 32% between 2020 and 2021.

Due to the notable national increase in frequency of ARDS in 2020 and 2021, we explored geographic variation in this measure compared to that of PMPM claims costs. The highest 2020 net changes for frequency of ARDS were in southern states (Texas, Mississippi, Virginia, Florida), followed closely by New York and New Jersey, which were COVID-19 hotspots. However, there was little to no correlation between net change in claims costs and in frequency of ARDS in 2020. In 2021, there was a moderate correlation between states’ net change in claims costs and in frequency of ARDS, with states such as Vermont and Minnesota among the highest on both measures.

maps showing changes in costs by state (left) and prevalence of ARDS (right)

Changes in costs by state (left) and prevalence of ARDS (right)

Avoiding care due to the pandemic likely outweighed potential increases in care due to COVID-19 illness

The potential effects of the pandemic included both increases in utilization due to COVID-19 illness and complications, as well as decreases in utilization due to delay of care and closure of medical offices. The 2020 net decreases in condition frequencies and claims costs suggest the latter may have outweighed the former. Our measure of prevalence through HCC frequencies only reflects conditions that were diagnosed during healthcare visits. There were likely additional cases of diseases in 2020 that were not recorded on claims due to enrollees staying home instead of seeking care. We suspect this is the likely cause for the net decreases in frequencies.

The only detectable increase in frequency was for ARDS, which counts towards risk adjustment between issuers. Given that claims cost decreased overall, the costs of the pandemic likely did not strain the ACA individual and small group markets in 2020. Even in the most heavily affected areas, geographic variation in COVID-19 prevalence (as measured through frequency of ARDS) had little to no correlation with insurer costs.

The COVID-19 pandemic has continued beyond 2020 and new variants, including Delta and Omicron, emerged in 2021. However, the expected year-over-year increase in condition frequencies and insurer costs returned in 2021. The net increases in 2021 were higher than in pre-pandemic years, likely due to the lack of increases between 2019 and 2020. In addition, people were generally more willing to leave their homes, including for medical care, as vaccinations and treatments have become widely available.

Molly Frommer

Molly Frommer is an Analyst in the Health Care Financing and Payment Program at RTI International.

Molly Frommer

Brett Lissenden

Brett Lissenden is a Research Health Economist in the Health Care Financing and Payment program at RTI International. His current work focuses on risk adjustment for health plans and payment models for cancer patients on behalf of the Centers for Medicare & Medicaid Services. He received his PhD in Economics from the University of Virginia. He is also a credentialed actuary.

Brett Lissenden
Brett Lissenden

John Kautter is a Principal Scientist and Senior Economist at RTI International. Dr. Kautter specializes in the development, implementation, and evaluation of health care payment models, including payment models for fee-for-service and managed care, and hybrid payment models. He has served as Project Director on several large government-funded projects, including currently on the Centers for Medicare and Medicaid Services ACO REACH project and Part C, Part D, and ACA Risk Adjustment project.



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