Managed Care

Who’s Afraid of the Big, Bad Flu?

Tony Berberabe
Associate Editor

Back in August 2009, President Obama’s Council of Advisors on Science and Technology (PCAST) developed a plausible scenario based on the 2009 H1N1 influenza strain and its appearance in the spring, its continued circulation in the United States during the summer, and its spread through much of the southern hemisphere during the winter season.

Their numbers were not as stark as the 1918 outbreak of flu that gripped the world, in which one-third of the world’s population was infected, or about 500 million people, but the council’s prediction made headlines nonetheless.

The report issued by PCAST was typical of the reaction to the infection and it painted a chilling, but plausible, scenario in which the H1N1 strain caused signficant morbidity and mortality worldwide. In the United States alone, as much as 30 percent to 50 percent of the population could be infected, with 60–120 million people suffering from symptoms, more than half of whom would be seeking medical attention. H1N1 infection could lead to as many as 1.8 million hospital admissions and it could result in between 30,000 and 50,000 deaths, especially among children and young adults. In contrast, regular seasonal flu mainly affects people over 65 years of age and can result in 30,000–40,000 deaths annually.

By December 2009, however, it was becoming apparent that the United States was experiencing a relatively mild influenza season. The collective preparedness of insurers, employers, and providers helped keep this pandemic at bay.

“We experienced relatively little seasonal flu this past year,” says Jeff Dimond, health communications specialist at the Centers for Disease Control and Prevention (see “Estimates of 2009 H1N1 Cases and Related Hospitalizations and Deaths,” below). “While we won’t know the reason until more data are collected, we suspect there are several reasons for this. First is the number of individuals who were protected by vaccine. Second, there was great emphasis placed on personal hygiene [hand washing, staying home when sick, etc.]. And third, there might be a biological reason for the mild season: The H1N1 virus acted in a manner as to crowd out the seasonal flu virus this past year.”

Estimates of 2009 H1N1 cases, related hospitalizations, and deaths by age group (April 2009–February 2010)

With seasonal influenza, about 60 percent of hospitalizations and 90 percent of deaths occur in people age 65 and older.

With H1N1, approximately 90 percent of estimated hospitalizations and 87 percent of estimated deaths from April through March occurred in people younger than 65.

A study conducted by CDC and published in the Journal of the American Medical Association estimated that, on average, more than 200,000 people in the United States are hospitalized each year for respiratory and heart conditions associated with seasonal influenza virus infections. More than 36,100 deaths related to seasonal flu occur every year on average.

2009 H1N1 Median Estimated forecast
0–17 years 19 million 14 million to 28 million
18–64 years 34 million 24 to 50 million
65 years and older 6 million 4 million to 8 million
Cases total 59 million 42 million to 86 million
0–17 years 85,000 60,000 to 125,000
18–64 years 154,000 109,000 to 226,000
65 years and older 26,000 19,000 to 38,000
Hospitalizations total 265,000 188,000
0–17 years 1,250 890 to 1,840
18–64 years 9,200 6,530 to 13,500
65 years and older 1,550 1,100 to 2,280
Deaths total 12,000 8,520 to 17,620
*Deaths have been rounded to the nearest ten, hospitalizations to the nearest thousand, and cases to the nearest million.
Source: The Centers for Disease Control and Prevention. CDC estimates of 2009 H1N1 influenza cases, hospitalizations, and deaths in the United States, April 2009–February 13, 2010

When a person is infected with one respiratory virus, such as a virus that causes a cold, the chance of catching a different virus, like influenza, declines greatly. Part of the reason for this is that the first virus provokes the body to start mobilizing the immune system, and this results in a cascade of cellular hormones that defend the body in a general way without targeting a specific virus. The protection can last for weeks, and this heightened immune level can break the chains of transmission and slow a flu epidemic.

This can also happen among different flu strains, where one strain like H1N1 gains a quick hold on many people and prevents other strains, like the seasonal flu, from gaining a foothold. As of Jan. 21, 2010, the predominant influenza virus in circulation was the 2009 H1N1 virus. More than 99 percent of all 2009 H1N1 viruses tested have been similar to the virus in the current 2009 H1N1 vaccine. Very few seasonal influenza viruses have been isolated and analyzed at CDC.

Normal cost of doing business

“The seasonal flu is tricky, and predicting the severity of any given flu season is a mystery,” says Jim Toole, managing director of MBA Actuaries and a spokesman for the Society of Actuaries. He says health plans usually do not make special budgetary allowances as a new flu season approaches because they know the flu happens every year. “It’s just part of the normal cost of doing business,” says Toole. “Typically, insurance rates are set about 18 months in advance.... For the larger insurers, H1N1 wasn’t part of their budget equation.”

So when the first cases of H1N1 started appearing in Mexico in May 2009, insurers’ rates “had already been developed, filed, and purchased by customers and health plans, far in advance of when H1N1 presented,” says Toole.

How the different types of insured entities reacted to the H1N1 pandemic is of interest.

“Self-insured plans don’t set rates — they just pay claims,” says Toole. “Whatever happens, happens. Basically, they hope they have enough cash on hand to cover all the cases.

“Large group insurers are experience-rated or merit-rated. If they experience a bad quarter because of increased claims, some of the risk is shared between the employer group and the insurer.”

Plus large insurers have general contingency plans in place. “Large insurers have enough reserves and funds available so that they can be prepared for any major outbreaks,” says Russell Robbins, MD, principal and senior clinical consultant at Mercer.

“Insurers experiencing a severe epidemic might have to reshuffle funding for new programs or new ideas because of the increased costs. Conversely, if programs originally budgeted don’t cost as much, large insurers can shuffle the funds and expand preventive programs, such as immunization programs, to take advantage of the extra funding.”

But small-group insurer rates are filed 18 to 24 months in advance.

“If you are a small group trying to predict the severity of the flu season, and you allow for a high number of claims but the flu season is a mild one and the claims don’t come in, then it’s a profit,” says Toole.

He adds that regulators may not want that to happen consistently — and neither would employers.

Collective message

Insurers also played a crucial role on the front lines of clinical treatment by removing a significant barrier — denial of coverage.

“Health plans reacted very well to the potential epidemic,” says Robbins of Mercer Consulting. “They all came out and said they would cover the H1N1 vaccine. There wasn’t a moment of hesitation about paying for it or coding for it. Insurers’ collective message was, We are going to make sure people get this vaccine and it will be paid for.”

This removed any potential cost barrier. “That was a major message to employers, members, and consultants,” says Robbins. “To their credit, insurers ramped up their efforts to communicate, and they put out their policy statements through a wide variety of media.”

He says that although the epidemic did not pan out the way the CDC expected, people who were infected by H1N1 did feel its effects. Many who might have been infected “may not have been tested for it. Many physicians said to their patients, Whether you are infected or are not, we’re going to say that you are, so take a few days off from work.” This helped corral the cases, essentially quarantining the infected and minimizing the public’s exposure to the virus.

Wake up call

Insurers are not playing down their experience.

“H1N1 had an impact on our 2009 medical benefit ratio,” says Fred Laberge, a spokesman for Aetna. “Our medical costs associated with H1N1 for 2009 were approximately $85 million. For COBRA, costs were approximately $95 million higher than normal.”

H1N1 served as a wake-up call for both employers and insurers, says Robbins. The CDC estimates that as of mid-February, 72–81 million people were vaccinated against the H1N1 strain. And between 81 and 91 million doses of H1N1 vaccine have been administered. Although the United States responded well to the emergence of H1N1 overall, it became apparent as the flu season progressed that employer contingency plans needed to be created, reviewed, and improved.

“Employers realized that they didn’t have a disaster plan in place that was comprehensive enough for their organization,” says Robbins. Employers moved to develop plans so that the next time something like this comes around, they won’t have to start at square one.

“Many also recognized that they had an emergency plan for one division of their company or different emergency plans for different divisions, but that the divisions were not communicating with each other,” says Robbins. Employers then took it upon themselves to close those gaps in communications.

“I think insurers were doing the same thing,” says Robbins. “They were making contingency plans based on vaccine availability and vaccine storage and prioritizing vaccine distribution — and working with the CDC. It took a lot of time and effort to do that. Even though the pandemic was mild, the lessons learned will help insurers respond even better the next time.”

Comes in waves

Will we be as lucky with this year’s flu season? Dimond of the CDC says, “We do not make a forecast, per se, as to the number of cases of seasonal flu we expect in any given year. Flu, by its very definition, is completely unpredictable — other than we know it comes in waves.”

For further reading

Reed C, Angulo FJ, Swedlow DL, Lipsitch M, et al. Estimates of the prevalence of pandemic (H1N1) 2009, United States, April–July 2009. Emerging Infectious Diseases. December 2009.

Taubenberger JK, Morens DM. 1918 Influenza: the Mother of All Pandemics. Emerging Infectious Diseases. January 2006. Available at:

“From my perspective, I did not see insurers making special rate considerations for H1N1,” says Jim Toole, managing director at MBA Actuaries.

“H1N1 had an impact,” says an Aetna spokesman. “Our medical costs associated with H1N1 for 2009 were approximately $85 million.”

“The outbreak had less of an impact because many people got immunized and followed preventive measures,” says Russell Robbins, MD, a senior consultant at Mercer.

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