Coronavirus could lower healthcare costs for employers

Companies’ costs may fall by as much as 4% due to employees forgoing non-essential medical care during the pandemic.
By: | May 6, 2020 • 3 min read
(Photo by Joe Raedle/Getty Images)

The coronavirus pandemic could have some unforeseen consequences for employers: declining healthcare costs.

That’s according to a new report from consulting firm Willis Towers Watson, which finds that COVID-19 could reduce employer healthcare costs by as much as 4% in 2020 due to a decrease in employees getting non-essential medical care. The analysis updates the group’s previous report from last month, which found sharply different results—that employers could see their healthcare costs increase up to 7% this year due to coronavirus treatment and testing costs.

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“With treatment for COVID-19 top of mind, people have been putting off non-emergency medical care, including routine office visits and elective procedures at hospitals,” says Trevis Parson, chief actuary at Willis Towers Watson. “Given this reduction in use of medical services, we expect cost reductions due to care deferral to more than offset projected cost increases associated with COVID-19 infections.”

The analysis paints a good-news-bad-news scenario: Healthcare costs may decrease for employers, but employees may not be getting the non-coronavirus medical care they need during the pandemic. In turn, employees forgoing care may increase healthcare costs for companies in the long-run, says Kim Buckey, vice president of client services at benefits company DirectPath.

“There may be longer-term impact if health conditions are not identified and treated on a timely basis,”  she told HRE recently.

Willis Towers Watson’s study utilizes recent estimates of infection levels in the U.S., which vary significantly by geography and reflect the latest projections of Americans expected to be hit with the first wave of COVID-19. According to the analysis, at a 1% infection level, employer costs could decline between 1% and 4%, depending on how much medical care is deferred. At a 15% infection level, employer costs could rise or fall by roughly 1% depending on care deferral. In the most severe scenario—a 20% infection level—costs could rise between 1% and 3%, still below projections from the earlier analysis.

Read all of HRE’s coronavirus coverage here.

The estimates in the analysis reflect increases to 2020 employer medical and pharmacy claim costs only, Willis Towers Watson notes. Other healthcare plan costs, such as dental and vision, will likely see lower costs in 2020, as employees likely will eliminate some discretionary care. The analysis also does not consider other impacts, including non-health benefit costs such as disability or life insurance, increased mortality and broad negative economic impact.

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“The ultimate financial impact of COVID-19 on employer healthcare plan costs in 2020 will depend on other factors, including the rate at which the virus spreads and the severity of illness of those infected,” Parson says.

Kathryn Mayer is HRE’s benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver. She can be reached at kmayer@lrp.com.