COVID-19 virus exposes weaknesses, gaps in insurance

In the CV19 Task Force daily briefing, we see and hear the government scrambling to problem solve the ever expanding Pandora's box of the economic and human misery. On the health coverage side of the equation, we can see several adjustments or "bug fixes" that are being made on an almost daily basis.

As an example, federal law has stringent guidelines regarding how telemedicine is to be conducted. It was limited essentially to remote areas and couldn't be done in the patient's home. Centers for Medicare and Medicaid services have skirted the law by reclassifying telemedicine as virtual medicine. By contrast, commercial group plans have been doing telemedicine for years.

Some of the other "bug fixes" are the suspending federal licensing regulations for doctors working across state borders, reclassifying coronavirus treatment as an Obamacare Essential Health Benefit, and loosening IRS health savings account regulations. In particular, Health Savings Account health plans can now allow the insurance company to pick up the costs without having to dip first dollar into the HSA account.

Some employer group health insurance companies are allowing employees who opted out of their company health insurance to now enroll. Unfortunately, on the individual Obamacare market, the Trump administration opted to not open the health care exchanges and is instead setting aside $100 billion for hospitals to be reimbursed for uninsured coronavirus patients.

Insurance companies are prohibited by law from dropping an individual or group health insurance plan based on any illness; however, dropping coverage for nonpayment of health insurance premiums is permitted. Health insurance plans have grace periods usually of 30 days to catch the up payments. During the current coronavirus pandemic, some of the insurance companies will work with employers to extend the grace period on a case-by-case basis.

So, on the health insurance side of this pandemic there has been movement to bolster weaknesses. On the business insurance side of the crisis there has been little movement by the government or the insurance companies.

Jim Schwind, franchisee owner of Skatetime School Programs whose business rents skating equipment to school districts in 9 states, said "my business is devastated by school shutdowns, I've been in business for over 25 years." According to Jim, with school districts closed, his business has zero income and none of his business insurance can be brought to bear.

Business insurance policies were never designed to cover a viral pandemic. Language in business insurance policy contracts excludes a virus since a virus does not cause physical damage.

There are provisions for civil authority orders. Business continuation insurance provisions provide for some coverage for civil authority orders but only with respect to dangerous physical property conditions. There are ongoing discussions with state legislatures to make changes.

This could change in the near future just as terrorism coverage became available after 9/11; Insurance companies are working with Congress, the White House and the Department of Treasury to assist in developing some sort of a solution. With respect to helping their business insurance clients right now, most of the companies are offering a 30-day grace period to maintain their policies with no cancellations.

Disability insurance coverage for business owners can have business continuation provisions in the contract which would provide some coverage; but that would be coverage for the individual if there was a disabling individual sickness and not a shutdown per se of the business.

For Jim Schwind the options are few. Apply for an SBA loan that could take years to pay back. Put his business on ice and file bankruptcy. Or do nothing and hope the crisis resolves soon.

• Sharlene Langford, CIC, CISR, AIS, AINS, is an insurance broker at Troxell; David Castillo, LFB, is owner of Davesurance Inc. a health insurance consulting firm