Employer health-care costs will rise in 2021 for several reasons related to the coronavirus pandemic, according to a new report by Willis Towers Watson.
With many employees deferring medical visits due to lockdown measures and fear of contracting the coronavirus, health-care costs for U.S. employers are expected to be between 3.3 and 8.8 per cent lower in 2020 than originally expected. The report predicted employer health-care costs will then rise between 0.5 and five per cent above non-pandemic projections in 2021 due to continued care for patients and the delivery of previously deferred care not related to the coronavirus.
“COVID-19 has played havoc with all previous projections of health-care utilization levels,” said Trevis Parson, chief actuary at Willis Towers Watson, in a press release. “In 2020, we may see a reduction in national [U.S.] health-care expenditures on a per capita basis for the first time since 1960. However, this reversal in trend is highly likely to be only temporary, despite the continued uncertainty about the virus, as previously deferred care returns in 2021.”
The report studied four potential future patterns of the coronavirus infection and the subsequent impact on the level of care delivered to both virus and non-virus patients. Combining 2020 and 2021, it found cost reductions of between 2.8 per cent and 3.8 per cent from non-pandemic levels across the four patterns. The predicted rises and falls are in comparison to typical utilization baselines in the absence of the pandemic.
For example, an early control scenario predicted costs will drop 3.3 per cent in 2020, then rise 0.5 per cent in 2021, for a total savings of 2.8 per cent for the two-year period of 2020 and 2021. And on the other side of the spectrum, a widespread new infections scenario predicted costs will drop 8.8 per cent in 2020, then rise five per cent for a two-year net savings of 3.8 per cent.
The report also noted that the impact of the coronavirus on specific employer plans will differ based on a variety of factors that are geographically sensitive. It suggested employers keep an eye on the ever-evolving situation.
“Employers need to pay special attention to the impact of COVID-19 on their health-care spend,” said Parson. “The pandemic is driving significant volatility, which demands effective measurement. Broader changes to the health-care system are likely to result, which will challenge employers as they look to drive value to employees through their health-care plans. Employers will need to understand the rapidly changing health-care market landscape and the shifting needs and risk profiles of their workforce.”