Closes in 10 seconds skip ×

Here’s how much employer healthcare costs could increase due to virus

New analysis has big implications for HR executives left managing company healthcare costs for the year.
By: | April 2, 2020 • 3 min read
(Photo by Spencer Platt/Getty Images)

U.S. employers could see their healthcare costs increase up to 7% this year due to coronavirus treatment and testing costs—on top of the 5% increase companies had already projected before the pandemic, new analysis from Willis Towers Watson finds.

The news has big implications for HR and benefits executives, who were already struggling to hold down healthcare costs for their companies before the pandemic and have been turning to alternative methods of care and other strategies to help contain them.

“Despite employers and employees taking the right precautions at this perilous time, the coronavirus continues to spread and place enormous pressure on our nation’s healthcare system,” says Trevis Parson, chief actuary at Willis Towers Watson. “This spike in the demand for care is likely to lead to a significant jump in employer healthcare costs beyond previous expectations.”

Advertisement

The analysis finds that a 30% infection rate could increase medical and prescription drug costs between 4% and 7%, depending on how sick COVID-19 patients become.

Related: 8 benefits employers should zero in on during the COVID-19 pandemic

At a 10% infection level, costs could rise between 1% and 3%. In a more severe scenario—a 50% infection level—costs may rise between 5% to 7%. For this analysis, costs per infected person are estimated at about $250 for mild cases, $2,500 for moderate cases, $30,000 for severe cases requiring an inpatient stay, and close to $100,000 for catastrophic cases requiring intensive care. Overall, other healthcare costs, including those for dental and vision care, may actually decline this year as employees will likely eliminate some discretionary care, the analysis notes.

“The effectiveness of our containment strategy will determine what portion of the U.S. population will become infected,” Parson explains. “And that will have an impact on additional costs, which employers will need to consider as they design and finalize their benefit strategy and plan for 2021.”

Read all of HRE’s coronavirus coverage here.

Kim Buckey, vice president of client services at DirectPath, a benefits education company, agrees, saying that HR and benefits managers will have to take “a hard look at their claims experience after this year.”

“While costs due to elective procedures will certainly decline,” Buckey says, “the costs associated with COVID testing and treatment may well eclipse any cost savings from the canceled procedures.”

Advertisement

Employers are more aggressively turning to alternative healthcare methods like telemedicine in the wake of coronavirus to give employees care when they need it, as well as to hold down costs, since employees who use telehealth services may forgo expensive hospital or urgent care visits.

Related: Employer-sponsored healthcare costs top $20K a year

However, there could be other long-term healthcare cost implications as a result of coronavirus aside from specific COVID-19 treatment. That’s because many employees will forgo healthcare treatments and preventive care visits during the pandemic, which might have a big impact on employer healthcare costs, explains Buckey.

“Since preventive care visits will likely be canceled—other than those individuals who make use of telehealth options—and urgent care facilities often closed, there may be longer-term impact if health conditions are not identified and treated on a timely basis,” she 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.

More from HRE